AHT: New model of public investment in Da Nang Int’l Airport

Double benefit

The 21,000-square-meter International Passenger Terminal of Da Nang International Airport began construction on November 15, 2015 and has a total floor area of 48,000sq.m. The terminal consists of separate departure and arrival areas, 44 check-in counters, 20 exit counters, 22 entry counters, 10 departure gates, two luggage handling islands and four arrival luggage handing islands, among other facilities. The project has an overhead road with two lanes for moving vehicles and one lane for stopping ones, in addition to a parking area capable of accommodating 440 automobiles at the same time and two business-class lounges totaling 860sq.m, capable of serving more than 180 passengers each. The terminal has a capacity to serve up to 16,000 passengers per hour or four million passengers per year. The annual capacity is expected to increase to six million passengers in the future.

The Airport Corporation of Vietnam (ACV) has financed 10 percent of the project’s capital. The terminal is the first project in the aviation sector to be built with privately-owned capital. Unlike public-private partnership (PPP) investors, the AHT was established as a joint stock company to attract capital for the project from the community. Usually, a PPP project has its private partners establishing a company for its implementation. There are also cases where such a company is founded with the agreement and cooperation of participating parties, depending on the mode of investment like BOT (build, operate, transfer) or BTO (build, transfer, operate), BOO (build, own, operate) and DBFO (design, build, finance, operate).

AHT General Director Le Khac Hong said the new model immediately became effective, as it not only decreases the project’s implementation time to 17 months to timely serve the coming 2017 APEC (Asia Pacific Economic Cooperation) Summit in early November in the city of Da Nang, but also meets socioeconomic development demands of the city in particular and the Central Key Economic Zone in general.

“With a flexible, autonomous operation model, the AHT will be arranging non-aeronautical services in a professional manner following the principle of sharing sales revenues with businesses with which it works. The AHT will free those businesses from paying booth rental and electricity, water, and hygienic and environmental service charges to encourage them to offer products with a high quality and competitive price in order to increase sales value,” Hong said.

Using capital from different private sources, the project benefits different parties: The state doesn’t have to invest in major infrastructure development projects; concerned localities benefit from project’s early completion, and the project contributes to promoting their socioeconomic development, especially the growth of tourism, trade and transport, and logistics industries; the project’s high quality services and competitive service prices benefit passengers; and the project provides opportunities for airline partners to increase the number of flights and provide passengers with higher quality and more professional services.

New direction for aviation infrastructure projects

The ACV said airport infrastructure development would need an estimated VND31.67 trillion from 2016-2020. While state capital and businesses’ investment funds could partially satisfy the demand, it is necessary and important to mobilize capital from other sources.

Hong said that the project would be behind schedule if its capital was only mobilized from traditional sources. Diversifying sources of investment would not only make private partners to finance but also share their technical and managerial expertise with developers of government-managed infrastructure projects, Hong added. With its rich experience and resources, the AHT will continue seeking opportunities to invest in other airports’ terminals following that capital mobilization model, Hong said.

According to Vo Huy Cuong, deputy director of the Civil Aviation Authority of Vietnam (CAA), diversifying sources of investment helps decrease the burden on the state coffer, make ricks shared by different partners and parties, maximize project’s investment efficiency, improve public service quality, and make use of private partners’ technological and managerial expertise. The model shows the new mode of investment for future aviation infrastructure projects to develop in compliance with Vietnam’s transport infrastructure development strategy to 2020 with a vision to 2030, Cuong said.