Vietnam's privately-owned carrier Air Mekong is on the edge of shutting down its operation due to steep losses, making it the second private airline to stop operations in Vietnam.

The airline officially announced that it would suspend flights at the end of February to "restructure its fleet and personnel."

Air Mekong's booking agents have said that they still have seats available for flights up until Feb. 28. Customers who tried to book flights after Feb. 28 all received the same message of no flight schedule available.

Despite the suspension of flights, Air Mekong will continue its other registered commercial activities after Feb. 28.

Ho Quoc Cuong, head of the Air Transport Department under the Civil Aviation Administration of Vietnam (CAAV), said that the CAAV has not yet received any formal notice from Air Mekong on its plan to suspend operations.

There have been reports that the airline is saddled with financial obligations, particularly its unpaid bills with the Vietnam Air Petrol Company (Vinapco).

Local media revealed that Air Mekong has to spend some 1.3 billion Vietnamese dong (around 61,300 US dollars) daily on petrol alone. Recently the airline failed to make regular payments for their fuel consumption, prompting Vinapco to demand settlement of accumulating debts.

Aside from fuel debts, Air Mekong has also been developing air routes that turned out to be unprofitable, said an aviation expert, adding that the airline's decision to exploit niche market was a risky one.

Doan Quoc Viet, chairman of Air Mekong, has said that the airline's strategy of first attacking niche markets was to avoid a direct confrontation with the "big guy," the state-owned Vietnam Airlines. Afterward, it would think of expanding to other backbone air routes, Viet said.

This explained why Air Mekong first developed the air routes from Hanoi and Ho Chi Minh City to islands and sea tourist sites in the central region and Central Highlands, including Phu Quoc Island, Con Dao Island, Buon Ma Thuot, Vinh, Pleiku, Quy Nhon and Da Lat.

However, niche markets depend on seasonal factors. The destinations that Air Mekong considers profitable, including Phu Quoc, Con Dao, and Buon Ma Thuot, are only busy during peak tourism seasons.

Also for the lucrative route of Hanoi-Ho Chi Minh, Air Mekong is not the best choice for passengers because of transit time.

The aviation expert also said that the choice of aircraft was also one misstep that has contributed to the losses of Air Mekong.

Air Mekong is the only airline in Vietnam using the 90-seater Bombardier CRJ900 aircraft manufactured in Canada. Currently, it is leasing four Bombardier CRJ900 aircrafts from the US-based SkyWest Airlines.

Compared with similar-sized aircraft, including the Airbus A320, Bombardier CRJ900 can only carry half of the passengers, while the price of leasing is not cheaper. The aircraft serve less while the company still has to pay the same salaries to pilots, flight attendants and ground crew.

After a period of commercial use, Air Mekong said the aircraft were not suitable for further flights, adding that one of the reasons why they were suspending their flights was to look for replacement aircraft.

Air Mekong, which launched its first flight in October 2010, is the third private airline licensed in Vietnam, after Indochina Airlines and VietJetAir.

The country's first private airline, Indochina Airlines, owned by Ha Hung Dung, popularly known as music composer Ha Dung, had to cease operation due to financial problems after only a year of offering services on two aircrafts leased from a Czech Republic- based Travel Service airline.

Indochina Airlines suffered huge costs as it had to hire pilots and flight attendants from the Czech company. Its license was then revoked by Vietnam's Ministry of Transport in 2011.

One of the main causes behind the losses incurred by Vietnamese private airlines is heavy fuel payment and high operational costs.

The airlines have to spend huge expenses for aircraft maintenance costs as well as in salaries for their foreign crew.

As reported by the local Tuoitre (Youth) news, Air Mekong has now 40 foreign pilots, each with a salary of about 10,000 US dollars a month, while a technical employee gets 7,000 US dollars a month.

The airline's total revenue in 2012 posted an increase of 7 percent over 2011.

The suspension in operations of Air Mekong is not causing a big loss to Vietnam's aviation operations, but has raised public concern over the monopoly of state-owned Vietnam Airlines that could affect competitiveness in the domestic aviation.

Currently, Vietnam Airlines accounts for more than 80 percent of the local aviation market share.