Vietnam airlines - 30 flights delayed because of no fuel?

On April 1, all the 30 domestic flights of Pacific Airlines were delayed for 2-3 hours as the only petrol supplier, the Vietnam Air Petrol Company, Vinapco, interrupted providing fuel to the airline.
Pacific Airlines said that on the morning of April 1, Vinapco unilaterally stopped providing fuel to Pacific Airlines’ aircrafts, since the two sides could not reach the agreement on the petrol price increase as of April 1 as requested by Vinapco.

Tien phong newspaper on April 2 wrote that under the contracts on selling and purchasing petrol for 2008 signed between Pacific Airlines and Vinapco on December 31, 2007, Pacific Airlines has to pay Vinapco the petrol charging fee of VND593,000/tonne in addition to the petrol price, transport fee, insurance and import tax.

On March 20, 2008, Pacific Airlines received the dispatch from Vinapco, which informed that the latter will raise the petrol charging fee to VND750,000/tonne.

However, the air carrier did not accept to change the provisions of the contract, because Vinapco sells petrol to Pacific Airlines at the higher prices than the prices at which it sells to Vietnam Airlines. Meanwhile, according to the Government’s decisions, Vietnam Airlines and Pacific Airlines must be equally treated.

On March 31, Pacific Airlines sent a petition to the Government, the Ministry of Transport, the Ministry of Finance, the Civil Aviation Administration of Vietnam, requesting the intervention to the issue.

Right after receiving the petition from Pacific Airlines, Minister of Transport Ho Nghia Dung immediately asked Vinapco to resume providing fuel to Pacific Airlines. Pacific Airlines’ aircrafts got the fuel at 8.30 of the same day to take off.

However, Tran Huu Phuc, Director of Vinapco, said that Vinapco would provide fuel for several days, and if Pacific Airlines does not accept the price increase, Vinapco will stop providing fuel “until the two sides reach agreement” as Nguoi lao dong wrote on April 2.

Deputy Head of the Civil Aviation Administration of Vietnam (CAAV) Lai Xuan Thanh said that the action of Vinapco to stop providing petrol has violated the laws. CAAV has requested the Ministry of Finance to chair the price negotiation between the two sides in order to reach the final agreement.

Dr Le Dang Doanh, Economist, said that Vinapco has taken advantage of its position as the sole distributor of air petrol. This is a kind of public service, as the lack of fuel will cause air traffic jam, which badly affects the society.

Vinapco: We have to do that to protect ourselves

Tran Huu Phuc, Vinapco’s Director on April 2 stressed that Vinapco does not take advantage of its position as the sole distributor of air petrol. Phuc said that Vinapco only stopped providing petrol after it informed Pacific Airlines about the increase in fuel supply fee.

According to Phuc, Vinapco, the 100% state owned company belonging to Vietnam Airlines Corporation, provides 50,000 tonnes of fuel every year, 60% of which serves domestic airlines.

Vinapco does not build up its sale prices, but it sells fuel to airlines at the prices it imports from suppliers, and collects fuel supply fees (storage, preservation, transport, depot leasing fee).

Phuc said that the higher transport fee and the high ratio of loss in transit both have forced Vinapco to raise the prices. The State now does not subsidise air petrol and even imposes the high import tax rates of 10-15%.

He said that JET A-1, the petrol which is being used in Vietnam, cannot be stored in big quantities due to the chemical and physical properties of the fuel. The current reserves of this kind of fuel are 20,000 tonnes, which is enough for 10 flight days.

Under the latest contract between Vinapco and Pacific Airlines on December 31, 2007, the agreed price was VND593,000/tonne. However, Phuc said that the price was inked when the world’s price was $76.2/barrel, while the price now has soared to $110-130/barrel. Therefore, Vinapco three times, on March 12, 21 and 28 informed Pacific Airlines that it had to raise the price.

As for Pacific Airlines, it said that it would be reasonable to raise the price once the world’s price increases. However, the airline said that the supply fee must be the same for domestic airlines. While Vietnam Airlines can enjoy the lower supply fee, Pacific Airlines has to pay the higher fee.

However, Phuc said that in principle, Vietnam Airlines can enjoy lower fees because it purchases more fuel than Pacific Airlines (Vietnam Airlines purchased 500,000 tonnes of fuel, while the volume is 10-11 times lower for Pacific Airlines).

In fact, Vinapco sent a document to Vietnam Airlines, informing about the application of the new price of VND779,000/tonne. However, the corporation has not approved due to the complicated procedures.

Negotiations to be resumed

Pacific Airlines said that Vinapco is the only distributor of air fuel in Vietnam, therefore, the airline does not have any other choice. It also said that the interruption of fuel supply may push the airline into the wall.

Pacific Airlines’ said that the fuel price increases applied for Pacific Airlines alone but not for other domestic air carriers, will force Pacific Airlines to raise the airfare, thus reducing its competitiveness, while it is undergoing the restructure process.

A question has bee raised that why Vietnam Airlines, which also did not accept the fuel supply fee increase, still can get fuel from Vinapco, while Pacific Airlines does not.

Answering the question, Phuc from Vinapco said that the relationship between Vinapco and Pacific Airlines is the partnership, while Vietnam Airlines is the owner of Vinapco.

Luong Hoai Nam, General Director of Pacific Airlines, said that under the contract, the price and fee adjustments must get the agreement between the two sides. Negotiations must be carried out until the agreement is reached. The fact that Vinapco unilaterally stopped supplying fuel has violated the signed contract.

Nam said that as the air petrol supply remains the sole service with Vinapco being the only supplier. If the two sides cannot reach agreements, they need to carry out negotiations with the chair of the Ministry of Finance.

When asked if Pacific Airlines will sue Vinapco, Nam said ‘no’, adding that this is not an active move. Pacific Airlines is the second biggest client of Vinapco (after Vietnam Airlines), and it wants to build a sustainable relationship between the two sides.

Tran Duy

Vietnamnet