Vietnam airline market takes off

TN News

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Economic recovery is set to spark demand, competition and reasonable fares on Vietnam's air travel market, industry insiders say.

Vo Huy Cuong, head of the Civil Aviation Administration of Vietnam's Air Transport Department, said many airlines expecting post crisis gains had recently been licensed for expansion in Vietnam.

"Airlines expect the market to recover in both passenger and cargo services with support from the economic growth predicted around the globe," said Cuong.

Cuong said the market was estimated to grow 10 to 15 percent, double national economic growth estimates of 6.5 percent this year. It grew 8.4 percent last year, he said.

Viva Macau Airlines was the first carrier to expand its services in Vietnam this year as it opened a direct route to Hanoi during the Tet Lunar New year Holiday. The three weekly flights were in addition to its first route to HCMC opened two years ago.

JetstarAirAsia, the world's first low-cost carrier alliance, said it would nearly double its flights between Singapore and Ho Chi Minh City from May to July, according to local media.

Vietnam Airlines has also opened its two latest routes linking Hanoi with Osaka, Japan and Rangoon, Myanmar. The national flag carrier will start direct flights from Hanoi and HCMC to Shanghai, China later this month. Pham Ngoc Minh, Vietnam Airlines' director general, said the nation's largest carrier planned this year to add 16 new aircrafts to its current fleet of 58 jets and join Skyteam, the world's biggest carrier alliance.

Vietnam Airlines aims to serve 11 million passengers this year to earn VND32 trillion, or US$1.68 billion, in revenues, a rise of 18 and 30 percent respectively.

Do Anh Tuan, managing director of Trai Thien Air Cargo, said sales on Vietnam's airline market would rise on huge demand from local passengers and businesses as other means of inland and waterway transportation were still underdeveloped in Vietnam.

There would be more competition between passenger and cargo carriers along main routes to attract customers and prices would be fairer, said Tuan whose optimistic prediction was that the market would grow 20 to 25 percent this year.

Trai Thien, Vietnam's first private cargo carrier licensed in late 2008, plans to commence its first flight between Hanoi and HCMC in May. The company is targeting garments, electronics and foodstuffs companies as potential customers.

Also in May, Hong Kong Airlines and Malaysia-based Neptune Air are also scheduled to increase their passenger and cargo flights to HCMC and Hanoi, according to Civil Aviation Administration of Vietnam (CAAV).

CAAV said Cargolux wanted to expand to Hanoi after the cargo carrier started its first route to HCMC from Luxembourg. The airline flies garments, footwear, handicraft and electronics to Europe. It also carries seafood products, fruit and vegetables to Asian destinations.

Vu Duc Bien, business and commerce manager at Vietnam Air Services Company, or Vasco, said demand from businesses would grow as they scout for international opportunities in the coming years. He said economic recovery would no doubt boost this demand.

Bien predicted that the market for charter flights for geographic and oil surveyors and researchers would also develop, saying that such services would increase by 30 percent this year compared to zero growth last year due to the crisis. Vasco, a unit of Vietnam Airlines, operates in passenger short-haul flights and services for businesses.

No new carriers permitted until 2012

Cuong from the administration said the government would not issue new licenses for passenger and cargo carriers to operate domestic flights until 2012 in compliance with a government strategy that aims to support those already in the business.

Vietnam's three private carriers, Indochina Airlines, VietJet Air and Mekong Air, are licensed to operate in domestic and international flights, but the latter two have yet to fly.

The administration approved AirAsia's acquisition of a 30 percent stake in VietJet Air last month, allowing the Vietnam-based joint venture to provide domestic and international low-cost flights in May. The move came after Australian low-cost Jetstar got approval from the government to acquire a 27 percent stake in Jetstar Pacific.

Losses and spiraling debt forced Indochina Airlines to suspend its services last year. The newest airline has two and a half months to reopen with a certificate from the administration or stay closed forever.

The government has also recently approved the establishment of a new airline named VietAir Airlines Joint Stock Co, under a proposal by Vietnam Airlines.

The airline had waited several years for the approval, said Cuong, who explained that the government had disapproved of the carrier's plan to include shareholders from state corporations outside the aviation industry.

UNDERSERVED TARGET

AirAsia's acquisition of a 30 percent stake in VietJet Aviation Joint Stock Company (VietJet Air) is part of our commitment to develop tourism in the ASEAN region. Through this venture and with our Vietnamese partner, we hope to encourage more tourists to visit Vietnam and see more of the country's beautiful destinations apart from Hanoi and Ho Chi Minh City, which we now fly to from four cities like Kuala Lumpur, Jakarta, Bangkok and Phuket. We also aim to offer more cost-effective travel options to help invigorate tourism in Vietnam and sustain the region's economic health.

We expect fair play and healthy competition from the other players in the industry. The Vietnamese aviation industry has room for growth, and we would like to contribute to the industry by meeting the underserved demand for low-cost flights and by connecting Vietnam to more destinations in the ASEAN region. We'll be working more closely with the Vietnamese government through the transportation and tourism offices, among others.

Desiree Bandal spokeswoman of AirAsia

HUGE POTENTIAL FOR MORE AIR TRAFFIC

The collapse of finance markets worldwide has shaped corporate travel policies, forcing many companies to review their travel budget and travel pattern. We experienced trading down from premium to economy compartments and reductions in frequency. Air travel demand did not reduce, but passengers were not willing to pay more for luxury and comfort. They opted for no-frills airlines in order to save costs. Thus I should say premium airlines like Cathay Pacific, or full service airlines, faced a very tough time in 2009. Cathay Pacific Vietnam's overall revenue dropped 14 percent last year. However, with over 86 million people and over 60 cities and provinces, Vietnam no doubt has huge potential for more air traffic.

Vivian Nguyen, sales and marketing manager of Cathay Pacific

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