Deputy Prime Minister Trinh Dinh Dung has agreed to a proposal of the Ministry of Transport (MoT) to delay the licensing of new airlines until the recovery of the aviation industry, expected to be in 2022.

The Vietnamese government would delay licensing new airlines until 2022.

In the meantime, the government’s priority would be to address difficulties and concerns of operating Vietnamese airlines, stated Dung in a document No.5833 issued on July 17.

Dung requested the Ministry of Planning and Investment to review the proposal of establishment of budget airline Kite Air.

With an investment of VND5.5 trillion (US$236.72 million), including VND4.5 trillion (US$193.67 million) in loans, Kite Air, owned by Thien Minh Aviation Company, would operate six ATR72 aircraft in the first year of operation.

Kite Air said by operating the short-haul regional airliner ATR72s, it targets to be a budget air carrier with a focus on domestic routes, aiming to serve passengers in localities with underdeveloped aviation infrastructure such as Dien Bien, Ca Mau, Kien Giang, and Con Dao.

Due to the Covid-19 impacts, the number of air passengers in Vietnam is estimated at 42.7 million this year, down 46% from 2019. Meanwhile, Vietnamese airlines are expected to serve 32.6 million passengers, down 40.7% year-on-year.

By 2022, total air passengers are set to reach 78 million, 27% lower than the previous estimate, with 57 million served by Vietnamese airlines, or 75% of the estimate. Under the most optimistic scenario, the number of air passengers in 2022 in Vietnam would be around the figure recorded in 2019.

Vietnam currently has five operational airlines which are national flag carrier Vietnam Airlines, budget carrier Jetstar Pacific Airlines (with a majority owned by Vietnam Airlines and poised to be renamed Pacific Airlines), Vietjet Aviation, Vietnam Air Services (VASCO) and Bamboo Airways.

In addition to Kite Air, Vietstar Air and Vietravel Airlines are waiting for operation authorization.

According to the MoT, the total aircraft under operation by Vietnamese airlines is 214, all of which are operating domestic flights and some air cargo shipment internationally at 50% of the actual capacity.

During the 2014 – 2018 period, Vietnam’s aviation market recorded high annual growth of 20.5% in the number of passengers and 13.2% in cargo, on average.

In a pre-Covid-19 study, the MoT expected Vietnamese airlines to serve over 60 million passengers in 2020 and nearly 96 million by 2025. This would require around 255 aircraft by 2020 and 384 by 2025, given an estimated 250,000 passengers per aircraft per year.