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Airports take decades to break even: aviation experts

By Anh Duy   September 21, 2022 | 04:30 am PT
Airports take decades to break even: aviation experts
Noi Bai International Airport in Hanoi in April 2022. Photo by VnExpress/Giang Huy
An airport with a capacity of one million passengers a year will cost VND3-5 trillion (US$127.6-212.7 million) but have a payback period of 40-50 years, according to analysts.

Many provinces like Son La, Tuyen Quang and Lao Cai in the north, Ninh Thuan and Quang Tri in the central region, Kon Tum in the Central Highlands, and Dong Nai in the south want to build airports.

Sapa Airport in Lao Cai will have a capacity of 1.5 million passengers and is budgeted to cost VND3.65 trillion, including nearly VND3 trillion from private investors. The breakeven period is 46 years and two months.

Covered an area of 265 hectares of land in Quang Tri's Gio Linh District, Quang Tri Airport will be built in two phases with total estimated investment of VND5.82 trillion, including VND5.5 trillion from the investor and the remainder from the state budget earmarked for site clearance. It will take the investor 47 years and four months to break even.

Aviation expert Nguyen Bach Tung said an airport costing VND3-4 trillion and with a capacity of one million passengers would earn annual revenues of VND36 billion from flights and VND100 billion from passengers. If the capacity is two million passengers, the investor would earn around VND250 billion a year, he said.

Unlike most other infrastructure works, an airport is very expensive to operate, with the annual expenditure on electricity, water and salaries for around 200 staff -- if the capacity is one million passengers – adding up to VND40-50 billion.

Interest on bank loans and depreciation add up to another VND300 billion.

Tung said in their initial years new airports, especially in mountainous areas, operate at well below capacity, but even if the design capacity is reached it would take decades to recoup the investment.

Many of the country’s 22 airports have yet to reach maximum capacity. In 2019, before the Covid-19 pandemic broke out, only 10 of them had reached or surpassed their designed capacity.

Some have few flights and revenues are not enough to cover operating costs, but since 21 of them -- except Van Don in the northern province of Quang Ninh -- are managed by the Airports Corporation of Vietnam, airports with high revenues take up the slack.

At a recent government meeting, Deputy Minister of Transport Le Anh Tuan said it is difficult to mobilize funds to upgrade or expand existing airports since the requirement is usually big while revenues are low at most.

The build-operate-transfer (BOT) option is not feasible since the payback period is too long, he said.

To attract airport investors, central and local governments should give them appropriate capital support during the investment stage, even in operation stage, he said.

Economist Ngo Tri Long said cities and provinces should carefully assess their economic potential and the likely number of passengers.

Infrastructure projects with a payback period of 10-15 years are effective and easy to attract investors, he added.

 
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