Vinapco, Pacific Airlines to start talks on fuel fee

06:26' 12/04/2008 (GMT+7)

VietNamNet Bridge – Executives of Vietnam Air Petrol Co. (Vinapco) and Pacific Airlines are planning a round of negotiations next week on new fuel charging fee that has hurt their long-established relationship following a supply disruption 10 days ago.

Vinapco director Tran Huu Phuc told the Daily on Wednesday that the firm has got a request from Pacific's chief executive officer Luong Hoai Nam for negotiations on the new fuel charging fee rise to VND750,000 per ton of petrol from the current VND593,000.

Nam confirm with the Daily over the phone on Wednesday that Pacific planned to meet Vinapco next week but did not go further whether the carrier will accept the new rate proposed by Vinapco.

"We cannot make any decision until we meet Vinapco," he told the Daily.

Vinapco want a higher fuel charging fee for Vietnam's first low-cost carrier in what it said will help offset losses incurred in the transport and storage process and given the world's increasing price of crude oil.

"We agreed on a fuel charging fee of VND593,000 for Pacific when crude oil was traded at around US$75 per barrel on the world market but the price has soared to more than US$100 a barrel today," Phuc said.

Therefore, Vinapco has to take measures to cope with losses as the company had not received Government subsidy for air petrol imports although the Government has agreed on a budget of VND12.7tril (over US$788mil) to cover losses for other fuel importers.

Phuc said he wanted Pacific to share the current burden of losses with the company.

"We have to cover many costs including for transport and storage, not mentioning a 1.52% loss rate for petrol in the process of transport, storage and pumping," Phuc said.

Phuc did not say anything about the chance for Vinapco to apply new fuel charging fee of VND750,000 per ton or even VND779,000 per ton, a rate that the company is seeking for approval of the big customer Viet Nam Airlines, which is also the parent firm of Vinapco.

It is expected that Vinapco will sit down with Pacific to discuss a proper charging fee though Phuc told the Daily last week that the firm did not find any season to negotiate with Pacific as the airline admitted higher rate was sound in the current situation.

"The practices for trade negotiations should be based on a cooperative spirit," Phuc said.

Experts said Vinapco would choose bilateral negotiations rather than a meeting for the two parties arranged by relevant agencies because it did not want to face any legal action.

Lawyers said there was evidence for Pacific to sue Vinapco for its unilateral disruption of fuel supply for a domestic Pacific plane for hours on April 1, resulting in the delay of some 30 Pacific flights and affecting more than 5,000 passengers.

But, Nam said Pacific had not had any decision. The carrier wants to focus on bilateral negotiations to reach an agreeable fuel supply cost in line with the current regulations and the Government's moves to curb inflation.

Pacific will only ask the Ministry of Finance to arrange negotiations for the two parties if it fails to strike a deal with Vinapco, which is under the umbrella of Vietnam Airlines.

Experts said legal actions may worsen the already-hurt relationship between Pacific and the State-run Vinapco as the latter is the country's sole air fuel supplier.

Phuc said Vinapco on Wednesday submitted to the Competition Administration Department a dossier explaining why the company interrupted fuel supply to a Pacific plane as requested by the agency last week.

The administration looked into the case as there were signs that Vinapco abused its advantage as the country's sole air fuel supplier and the fact that the dispute between Pacific and Vinapco was not their own case any more as it affected the interest of customers.

Phuc said Vinapco did not take advantage of its monopoly and denied any wrongdoing.

He stressed that Vinapco had sent at least four documents to Pacific demanding higher fuel charging fee and negotiations before the fuel supply interruption.

However, Pacific turned down the demand as the carrier would have to pay big extra money for fuel bills, which account for more than 50% of the carrier's flight costs.

Asked what will happen to Vinapco, the competition administration's deputy head Tran Anh Son told the Daily that "it is too early to comment on the case. We need more time for investigation and talk to the two parties before coming to a conclusion."

The administration will follow the set procedures, based on the two laws, the Competition Law and the Ordinance on Protecting Consumers.

Now, Vinapco has resumed pumping fuel for Pacific planes as ordered by the Ministry of Transport despite the absence of an agreement with Pacific, Vietnam's second largest airline after the national flag carrier Vietnam Airlines.