A proposal by the Airports Corporation of Vietnam to upgrade the airport’s capacity from 300,000-500,000 passengers annually has low profitability and a long investment recoup time, the Commission for Management of State Capital at Enterprises (CMSC) says in a report to the government.
It says that the internal rate of return for this project, located in the northern highlands province of Dien Bien, is estimated at 3.07 percent and it would take 50 years to recoup the VND1.54 trillion ($66.5 million) investment.
The airport lacks tourism potential and is not a dominant transportation port. In fact, it is still not functioning to its full capacity, the report says.
It also says that the ACV, which manages 22 airports, needs over VND136.5 trillion for airport development in the 2020-2025 period, but as of last year its cash reserves were just VND31 trillion.
As the Covid-19 pandemic is set to cause more damage to the corporation’s revenues, it should prioritize its capital spending for other, more important projects like expanding the country’s two largest airports in Ho Chi Minh City and Hanoi and constructing the mega Long Thanh International Airport in the south.
Upgrading the Dien Bien Airport in the 2021-2025 period could result in ACV being unable to balance its budget, the report says.
The report’s recommendations follow ACV making a proposal in August to upgrade the Dien Bien Airport by expanding its terminal and building a new runway capable of receiving narrow-body aircraft like the Airbus A321.
The Dien Bien Airport, originally a military airport built in 1954, began commercial operations in 1994. It has one 1,830-meter runway that can handle short-haul ATR72 aircraft and smaller ones.
The airport served 81,800 passengers in 2014, but the number fell to 57,300 last year, according to the CMSC.