Air Mekong (AMK) has been issued with a reminder after failing to pay its fuel bills with the Vietnam Air Petrol Company (Vinapco).

A ticket stall for Air Mekong

While being a debtor to several aviation service firms, the airline has to buy VND1.3 billion (USD62,290) worth of fuel per day to feed its four-plane fleet.

The private airline is thought to have racked up losses much higher than estimated since late 2010.

According to Vinapco leaders, the company recently had to seek local authority support to hasten Air Mekong’s payment as well as prevent possible larger debts.

Vinapco, however, has yet to reveal the exact figure of AMK’s debts to date as the two sides have still to meet together.

The fuel supplier said that AMK had pledged to do its utmost to pay off its debts prior to January 15. The proposal met with approval on the condition that Vinapco would continue to supply fuel for AMK and the airline has to immediately pay for any new purchases.

There have been rumours that AMK may halt operations as the firm is currently only selling tickets up to February 28.

But the airline claims it has yet to make flight plans for March.

The Civil Aviation Authority of Vietnam (CAAV) said it has received reports from some aviation service firms that they faced deferred payments from AMK in recent months.

Follow suit?

AMK became Vietnam’s third private airline after VietJet Air and Indochina Airlines (ICA).

ICA went out of business after a year of operations, having a fuel bill dating back six months after the first flight.

AMK’s investors, in contrast with ICA, had considerable experience in the aviation sector.

AMK uses 90-seat Bombardier aircrafts and provides services to sea and island areas as well as the central and the central highlands regions with its two major destinations of Phu Quoc and Buon Ma Thuot.

Initially, the airline mainly gathered clients for bigger carriers. It then expanded its services to more locations and carried clients to hotels and resorts nationwide under the management of Ha Long Investment & Development Company.

AMK recently considered using Airbus 320 aircrafts to save costs and enhance its capacity.

Licensed in 2009 with a chartered capital of VND280 billion (USD13.4 million), AMK announced its plan in June 2012 to increase its capital to VND600 billion (USD28.7 million) by signing a strategic cooperation agreement with a bank.

Under the agreement, the bank pledged to buy a 11% stake in the airline, along with supporting the leases and purchases of aircraft as well as AMK’s projects on infrastructure, trading service and technical development.

No-one is sure whether AMK has increased its capital but it’s obviously that the airline made losses in 2012 and the banking market saw a slump during last year.

If AMK fails to pay off its debts as pledged, Vinapco will have the right to halt fuel supplies.

Vinapco had applied such policy for Pacific Airlines and ICA in the past. However, Vinapco has yet to collect all its outstanding debts from ICA due to the airline filing for bankruptcy.