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Private sector emerges as new growth engine for Vietnam aviation industry: experts
Nguyen Tung 10:37, 2018/07/28
Although private enterprises only invested in 14% of the number of airports in the world, those airports are serving 41% of international air passengers, according to aviation experts.
Many experts are of the opinion that the private sector will have a more important role in Vietnam's aviation industry development in particular, and economic growth in general. 
 
Illustration photo.
Illustration photo.
Telling numbers

On the global scale, the aviation industry contributes 3% to the world's GDP, said Huynh The Du, Fulbright Economics Teaching Program's senior lecturer at a conference held by BizLIVE on July 26. 

In 2014, the world had a total of 1,400 airlines with 26,000 commercial planes, operating over 32 million flights, Du added. 

"As of 2017, the aviation industry generated revenue of US$754 billion and profit of US$34.2 billion. In this context, Vietnam is one of the most dynamic aviation markets with a similar growth rate to the Philippines'," said Du. 

By 2036, it is projected that the number of air passengers will double with countries in the Asia - Pacific region as the driving force for growth in the next 20 years, reaching 2.1 billion at the growth rate of 4.6% per annum, he added. 

In case of Vietnam, the country's population in 2034 is expected to reach 105 million, while the GDP per capita will be US$18,000 - US$22,000, Du continued. With this level of income, the amount of air passenger is calculated at 58 million per year, which can go up to 110 million per year for an income level equivalent to Thailand's. 

The International Air Transport Association (IATA) estimated that between now and 2020, passenger transportation in Vietnam is expected to rise by 16%, and from 2020 to 2030, by 8%. Cargo transportation will increase by around 18% until 2020, and 12% between 2020 and 2030. The growth will make Vietnam the world's fifth fastest-growing aviation market by 2035.

Under such estimation, Vietnam would need at least 10 additional new airlines to meet growing demands. As a result, it is inevitable that new private airlines are introduced to create more traveling options for passengers. 

"The private sector has emerged as a new engine of growth for Vietnam's aviation industry," Du stressed. 

Echoing Du's view, Nguyen Thien Tong, an expert in aviation engineering of the University of Technology emphasized the growing importance of private enterprises during the development course of aviation industry. 

According to Tong, private enterprises invested in 14% of the number of airports in the world, which are serving 41% of international air passengers. Therefore, Vietnam should encourage more private enterprise to invest in the industry, Tong added. 

Tong referred to a study on the spillover effect of the aviation industry, stating a domestic traveler contributes US$100 on average to economic development, while this figure is US$500 for foreign tourists. "200 million foreign tourists would contribute US$10 billion to the economy," Tong continued. 

"Twin brothers"

Economist Ngo Tri Long said air transport and tourism are "twin brothers" that complement each other. 

Long stated Vietnam remains potential for aviation industry and tourism development. "Aviation industry has the fastest growth rate among transport modes, which are placing more pressure on transport infrastructure. However, if we can address this issue, it will turn into huge development potential," Long added.

In particular, for a new airline like Bamboo Airways, a niche market is its best option, said Long.

The idea was well-received by Trinh Van Quyet, chairman of Vietnam's conglomerate FLC Group. 

"In the 2019 - 2020 period, FLC Group will have over 20 resort complexes. I believe a combination of air transport and tourism will be the way moving forward for Bamboo Airways. Our tourism infrastructures and network of resorts have brought benefits to other airlines. Thus, there is no reason for this project to fail," Quyet stressed. 

Bamboo Airways plans to provide direct international flights to destinations where FLC Group has resorts, such as Quy Nhon, Quang Ninh, Hai Phong, Phu Quoc, and Nha Trang, in addition to domestic flights connecting tourist spots in Vietnam.

"We will prioritize domestic routes which are often ignored by other airlines," Quyet concluded.
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