Vietnam waives tariffs on import of aviation fuel to help airlines in crisis

Vietnam has decided to do away with tariffs on import of jet fuel – which stands at 5% currently – from July 2008 in an effort to help the country’s airlines survive in the time of prohibitively high prices of oil. The Finance Ministry of Vietnam had cut the rate of import tax for aviation fuel from 10% to 5% about a month ago. At h at time, two kinds of aviation fuel – classified under codes 2710.19.13.00 and 2710.19.14.00 – had their import tax rate reduced from 5% to nil.

A statement from the Finance Ministry explained that “the waiver of tariff on aviation fuel is aimed at assisting domestic carriers to cut expenses.”

A statement from Vietnam Airlines, the flag carrier of Vietnam, has said that the carrier would have to pay about 2.2 trillion dong ($138 million) more than originally planned in March-June 2008, thanks to high oil costs.

Aviation fuel price, which has gone up about 80% so far in 2008, is an important factor affecting Vietnam Airlines’ total revenue, the statement added.

ATF prices now account for 55% to 60% of the total cost of flights for Vietnam’s domestic carriers, including Vietnam Airlines and Jetstar Pacific.

In an effort to reduce its losses, the low-cost carrier Jetstar Pacific had delayed plans to launch two new routes linking HCM City to Da Lat and Buon Me Thuot in the Central Highlands.

Meanwhile, the government of Vietnam has allowed Vietnam Airlines, the national flag carrier, to sell 10% to 20% of its stocks to foreign strategic partners.

According to media reports, the Vietnamese government will retain a 70%-80% stake in Vietnam Airlines, which will issue fresh shares to raise its chartered capital.

In 2007, Vietnam Airlines had carried a total of 8 million passengers and earned revenues amounting to VND20.37 trillion (US $1.2 billion) – the figures up, respectively, by 18% and 15.5% year-on-year.

In another development for the aviation sector in Vietnam, Vietnam Airlines is set to join SkyTeam, the alliance of airlines, as a full member.

Aviation analysts see the move as a “big step forward” in SkyTeam’s goal of adding new members from the Asia-Pacific region. Currently, SkyTeam’s partners in the Asia-Pacific region include founding member Korean Air and China Southern Airlines.