The purpose of this report is two-fold: (i) to review recent developments in the aviation sector including airport and ground support equipment, aircraft and parts, and air traffic management equipment in Vietnam, and (ii) to highlight the best prospects and sales opportunities for U.S. companies so they can gain an overview of the sector and formulate appropriate strategies for penetrating the Vietnamese market. The information and figures in this report were gathered from various official publications, press interviews, reports and press releases from the Civil Aviation Administration of Vietnam (CAAV), Vietnam Airlines Corporation (VNA), and its subsidiaries and affiliates, other local and foreign businesses, as well as relevant Vietnamese government agencies involved in the aviation sector.
2. Industry Organization
Aviation has been designated as one of the top priority sectors for development by the Vietnamese government, since it is viewed as a prerequisite to rapid national economic growth. The aviation industry in Vietnam is under the principal jurisdiction and management of the Civil Aviation Administration of Vietnam (CAAV), a government agency reporting to the Ministry of Transport.
3. Demand and Supply for Air Transport
According to the Civil Aviation Administration of Vietnam (CAAV), Vietnam’s overall aviation market in 2010 returned to double-digit growth in both passenger and cargo segments, with cargo shipments surging up to 30 percent year-on-year.
In 2010, 21 million passengers went through the country’s airports, up around 20 percent from a year earlier and also much higher than the 8.4 percent in 2009. The number of passengers on international flights in 2010 rose by around 20 percent to 10.7 million.
The total throughput of air cargo was more than 460,000 tons in 2010, with the national flag carrier Vietnam Airlines accounting for 166,300 tons on its domestic and international flights. The volume of cargo on international flights in and out of Vietnam last year increased 37% from 2009 to 340,000 tons. The aviation authority projected the market would grow 16-20 percent in passenger number and at least 20 percent in cargo load in 2011.
Besides the world’s improving demand for air travel and cargo shipments, Vietnam was offering more incentives to encourage local and foreign airlines to increase their frequencies and open new routes. The last quarter of 2010 saw a number of foreign airlines fly in and launch new services to the country, including Turkish Airlines, LOT Polish Airlines and Qatar Airways.
As of 2010 Vietnam Airlines (VNA) continued to account for more than 40 percent share of international passenger traffic and 80 percent of domestic passengers, while Jetstar Pacific Airlines holds roughly a 30 percent share of passengers carried on its main routes between Ho Chi Minh City, Danang and Hanoi, and makes up approximately 15 percent of the total domestic air travel market.
There are 41 foreign passenger airlines and 11 cargo airlines with regularly scheduled flights to and from Vietnam. The country currently operates a network of 22 major civilian airports including three major international airports: The Noi Bai Airport in the north (Hanoi), Danang in the center and Tan Son Nhat in the south (Ho Chi Minh City) and six planned international airports (Can Tho, Chu Lai, Da Lat, Hai Phong, Hue, Nha Trang). The Tan Son Nhat airport, with a new capacity of about 17 million passengers per year including a new terminal which became operational in September 2007, is the largest airport in the country, handling about 70 percent of the country's international passenger traffic.
4. Major Airlines in Vietnam
At present, Vietnam Airlines (VNA), Vietnam Aviation Service Company (VASCO), and Jetstar Pacific Airlines (JPA) are the three major air carriers in Vietnam.
4.1 Vietnam Airlines (VNA) and VASCO
VNA, the national flag carrier of Vietnam, was established as a state enterprise in April 1993 under the Civil Aviation Authority of Vietnam (CAAV). Vietnam Airlines Corporation was subsequently formed in 1996, after bringing together 20 service companies in the aviation sector. The company was then separated from CAAV and is now overseen by a seven-seat management board, members of which are directly appointed by the Prime Minister. As of March 2011, VNA operates a fleet of 69 airplanes with an average age of the VNA fleet at 7.1 years.
Vietnam Air Service Company (VASCO) was established by government directive in 1987, and is a fully-owned subsidiary of Vietnam Airlines, the national carrier. It is headquartered in Ho Chi Minh City and operates scheduled flights from its base at Tan Son Nhat International Airport to the south of the country. It also conducts charter flights, medical evacuations, SAR operations, oil platforms flights, and other aviation services.
Vietnam Airlines expanded domestic and international networks significantly in 2010, with 7 international and 4 domestic routes launched to push up its daily flights to 320 from 225. The SkyTeam member airline transported 12.3 million passengers for its domestic and international flights compared to just over 9.34 million last year, up 33.7 percent.
The airline ordered four Boeing 787-8 aircrafts in 2005 to be delivered beginning in 2009 and ten Airbus A321-200s in 2004 for delivery between 2006 and 2009. Subsequently, it ordered 12 additional Boeing 787-8 aircraft in late 2007, as well as 10 A-350s and 10 A- 321s. In 2010 the airline changed its Boeing 787-8 order to the 787-9 model and expected to receive its aircraft starting from 2015. The airline has replaced all ATR72-200s with ATR72-500s and received more modern planes to expand its fleet to 69 at present. The airline is expected to reach 104 and 150 modern aircraft in 2015 and 2020, respectively.
Today Vietnam Airlines’ network extends to 20 cities throughout the country and 43 international destinations. In 2006, after being awarded the IATA Operational Safety Audit (IOSA) certificate, a safety standard set by Aviation Quality Services (AQS), Vietnam Airlines joined the International Air Transport Association (IATA) as an official member. June 2010, Vietnam Airlines joined SkyTeam and code shared with most SkyTeam members.
4.2 Jetstar Pacific Airlines
Jetstar Pacific Airlines (formerly known as Pacific Airlines) is the second largest air carrier in Vietnam, having started operations in 1992 with VNA as the major shareholder (86.5 percent). It is the first joint stock airline formed in Vietnam following changes in the law to allow foreign investment in the country's airlines. In 2005, it narrowly escaped closure due to inability to pay its debts and continuous loss-making operations. By a decision of the Prime Minister of Vietnam, all of VNA's shares in the company were then transferred to the Ministry of Finance (MoF) and thereafter to the State Capital Investment Corporation (SCIC), a state owned company under MoF, for business and ownership restructuring.
On April 26, 2007, Australian airline Qantas acquired a 30 percent stake in PA for $50 million and became PA’s strategic partner. After this restructuring, SCIC continues to hold a 62 percent stake, Qantas 30 percent, Saigon Tourist Holding Corporation 7.53 percent, while the remainder is held by Tradevico (a company under the Ministry of Transport).
Jetstar Pacific is Vietnam’s first value based carrier. It is headquartered in Ho Chi Minh City, operates domestic and international services, and charter flights. The airline changed its name from Pacific Airlines to Jetstar Pacific on May 23, 2008, becoming part of the Jetstar LCC network operated by its shareholder Qantas. Jetstar Pacific’s existing Vietnamese domestic network includes Ho Chi Minh City, Hanoi, Da Nang, Hue, Vinh, Hai Phong and Nha Trang.
Jetstar Pacific currently operates five Boeing 737 - 400 aircrafts and two Airbus A320-200 aircrafts, and is moving to eight more Airbus A320-200 aircrafts in order to expand its network with more domestic and international flights into South East Asia. It is expected to add up to 15 Airbus aircrafts by 2014 and the Jetstar Pacific’s network will cover most countries in Asia.