Private airlines bring dynamism to Vietnam’s aviation industry
Competition helped eliminate monopoly in Vietnam’s aviation market.
The foray of private airlines have brought dynamism to Vietnam’s aviation industry, according to Vu Tien Loc, president of Vietnam Chamber of Commerce and Industry (VCCI).
Overview of the conference. Source: Ngoc Thuy.
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“Air transport was previously meant for the business class and high-income people, but now has been more affordable to a wider public,” Loc added.
Over the past few years, air transport has witnessed strong growth globally, especially in developing countries. Vietnam’s aviation market is not an exception and even records the highest growth in the region, Loc said.
He cited a research saying a 1% growth in aviation industry is equal to 0.4 – 0.5% GDP growth. In the case of Vietnam, the market grows 14 – 15% per year, equivalent to the GDP growth rate of 6.8 – 7%.
Ho Quoc Cuong, head of the Air Transport Department under the Civil Aviation Authority of Vietnam (CAAV), said in 2018, Vietnam’s airlines served nearly 50 million passengers, up 10.1% year-on-year and transported 400,000 tons of goods, up 27.2%.
Taking into account foreign airlines, Vietnam’s aviation market served around 70 million passengers last year, up 12.6% year-on-year.
“Demands for air transportation to and from Vietnam remains huge, presenting opportunities for airlines to grow,” Cuong said.
The International Air Transport Association (IATA) forecast Vietnam is well placed among five fastest-growing markets in terms of additional passengers per year, reaching 150 million passengers by 2035.
Meanwhile, with a population of nearly 100 million, Vietnam’s domestic aviation market is projected to grow at an average of 15% per year, stated IATA.
Institutional reforms key to address bottlenecks for growth
VCCI’s President Loc said Vietnam would need at least 10 airlines to meet transportation demand and create healthy competition, instead of the current five as it is. “The birth of private airlines is inevitable in this circumstance,” he continued.
However, such high growth is putting pressure on the infrastructure, security issue, and the lack of highly qualified workforce, Loc added.
“Legal framework, infrastructure and human resources should be given priority for the sector’s sustainable development,” Loc asserted.
Nguyen Dinh Cung, director of the Central Institute for Economic Management (CIEM), added the government should ensure suitable regulation in place for fair competition among enterprises.
“Vietnam’s economy is pushing for three breakthrough in terms of institution, infrastructure and human resources. All three breakthroughs have contributed to the development of the sector, but now seen as bottlenecks,” Cung said.
Sharing Cung’s view, Chairman of the Airports Corporation of Vietnam (ACV) Lai Xuan Thanh said current airports are being overloaded and unable to meet airlines’ strong growth.
VCCI President Loc said the the key issue in removing infrastructure bottleneck should come from the revision of investment law on transport infrastructure.
“Private companies have the resources and the will to solve the problem, therefore, institutional reform is key in this matter,” Loc stated.
Local media recently reported Vietnamese airlines are facing difficulties to carry out their plans to acquire new airplanes due to the limited governance capability of the CAAV.
In a letter in response to startup airline Bamboo Airways, CAAV said due to limited resources, the agency could only supervise 256 airplanes registered under Vietnamese nationality.
Previously, Bamboo Airways – backed by conglomerate FLC Group - proposed to operate 40 airplanes by the end of 2019. Including the number of airplanes subject to be delivered of other airlines, the total number of aircraft in Vietnam as of December 31, 2019 would reach 277, up 61 from the current number and exceeding the supervisory capability of CAAV by 21 airplanes.
Vietnam currently has a total of five airlines, including Vietnam Airlines, budget operator Jetstar Pacific Airlines (partly owned by Vietnam Airlines), budget carrier Vietjet Aviation, Vietnam Air Services (VASCO) and Bamboo Airways.
Vietravel, a leading tour company in Vietnam, is also seeking to set up an airline specialized in charter flight.
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