Asia Watch

That’s about to change later this year. The Deputy Director of the Civil Aviation Authority of Vietnam (CAAV), Võ Huy Cường, in January announced national carrier Vietnam Airlines (VNA) plans to launch direct U.S. services sometime in 2018, probably from Ho Chi Minh City (HCM) to either San Francisco or Los Angeles. The signing of an Air Services Agreement (ASA) between the two countries will also allow other carriers to launch, with fast-growing budget operator Vietjet already having said publicly it is interested.

VNA is best positioned because it already has suitable aircraft, with 11 B787-9 and eight Airbus A350-900 (there are 16 more to come) in its fleet. Also on order are eight B787-10 which will start arriving in 2019. But like the launch of any new route, adding the US to VNA’s network isn’t going to be easy.

As deputy director Cường puts it: “The competition is very fierce so the Vietnamese airlines planning to fly directly to the US must analyse and evaluate the situation carefully.”

Saying the competition is fierce is an understatement. For example, in Japan major carriers Japan Airlines and All Nippon Airways ply the one-stop route. In Korea, Korean Air and Asiana are both in the game. And they will be offering good ticket deals to keep their existing passengers.

All of these airlines are chasing the custom of Vietnamese Americans travelling to visit relatives or on business. The US is the fourth largest source of foreign visitors to Việt Nam, with more than 614,000 people coming in 2017, up 11 per cent from 2016, according to Vietnam’s General Statistics Office. Vietnam welcomed nearly 13 million foreign visitors last year and raked in nearly US$22.67 billion from tourism. It hopes new air routes will increase the number of visitors to 20 million in the next two years, when tourism revenues will contribute 10 to 12 per cent to the country’s GDP, compared with the current 7 per cent.

‘Vietnam welcomed nearly 13 million foreign visitors last year.’

For airlines, it is a rapidly growing market, with air traffic expanding at similar rates seen in boom markets such as China, Indonesia and India. The growth is so significant, however, that Vietnamese authorities are struggling to cope. In January the Vietnam Air Traffic Management Corporation (VATM) submitted a plan to the country’s Ministry of Construction to build a new air traffic control centre at HCM at a cost of US$61.7 million. The existing 12-year-old Area and Approach Control Centre’s technology and equipment will soon be outdated and its infrastructure is declining. By the end of last year, VATM handled around 800,000 flights.

“Given the current growth rate, the air traffic management output will reach 1 million flights by 2020 and 1.8 million flights by 2030, double a forecast we made in 2009,” said a VATM official.

Along with the fast growth of registered aircraft for navigation services, VATM added that demand for technology upgrades as well as flight safety and security enhancements are among the main reasons for the group to upgrade services. If the plan is approved, the new facility will be built with loans and the group’s capital. Construction is scheduled for three years, starting around the first quarter of 2018.