Mar 17, 2013

Vietnam - Aviation market not as gloomy as thought

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VietNamNet Bridge – The death of Indochina Airlines and the current difficulties of Air Mekong have raised a big worry that Vietnam would not have a competitive aviation market, if only the state owned Vietnam Airlines can exist in the market.

Private airlines, one after another leaves the market…

“Will any more investors dare to pour money into the aviation industry after Air Mekong halts its operation? If the answer is “no”, Vietnam Airlines would still hold the monopoly in the market, which also means that consumers would be put at a disadvantage,” an aviation expert said.

After Air Mekong halted providing commercial flights since March 1, only five airlines have been left, including Vietnam Airlines, Jetstar Pacific, Vasco, Angkor Air and VietJet Air.

Of these, Angkor Air is a joint venture between Vietnam Airlines and the Cambodian government. As such, Vietnam Airlines holds the stakes in all four airlines (Vietnam Airlines, Jetstar Pacific, Vasco and Angkor Air), while VietJet Air is the only private air carrier operational in the market.

Five private airlines have been set up over the last five years. However, most of them, including Indochina Airlines, the “early bird” which was established in May 2008, have disappeared from the aviation map because of the big losses and debts.

The disappearance of the airlines is not the thing the Civil Aviation Authorities of Vietnam (CAAV) wants to see. When licensing private airlines, the watchdog agency hopes that the existence of the new comers in the market would help bring more choices to passengers and eliminate the monopoly held by the state owned Vietnam Airlines.

…but one still exists

As such, VietJet Air has become the only private air carrier in the domestic market. While other private airlines are in the danger of having to stop operation, VietJet Air seems to be an exception.

The private airline, just within a short time, has developed a new modern fleet which allows to set up the air routes to nine provinces and cities nationwide. In early 2013, VietJet Air announced the opening of its first international route, becoming the first Vietnamese private airline that provides international services.

According to Desmond Lin, Business Development Director of VietJet Air, the air carrier served more than one million passengers in 2012 with the high seat occupancy rate at 87 percent. Especially, VietJet Air has been listed in the top 5 of the most successful newly launched air routes in the world.

The initial success of VietJet Air has raised a hope that there are still opportunities for private airlines in Vietnam.

VietJet Air is following the policy which aims to provide low and flexible airfare. This is the market segment which international experts believe to have great potentials to develop.

A report of IATA also showed that despite the decline in China and India, the airlines in Asia Pacific would still obtain the profit of two billion dollars this year. Especially, budget airlines are believed to have high growth rates.

The Vietnamese aviation market is believed to have great potentials with the population of 90 million and the majority of them are still young. Meanwhile, it is expected that only 12 million passengers would be served in 2013, which is just equal to 25 percent of the transport output in Malaysia, the country with less than 25 million people.

Compiled by C. V

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