Vietnam leads South-East Asian growth

Latest statistics from Vietnamese authorities tell the tale. According to data from the Vietnam National Administration of Tourism (VNAT), the number of international tourists visiting the country grew from 4.25 million in 2008 to 15.5 million in 2018, while the number of domestic tourists rose from 20 million in 2009 to 80 million in 2019. In the last ten years, total revenue from tourism has climbed more than ten times from A$3.8 billion in 2008 to $39.3 billion in 2018, accounting for 7.8 per cent of the country’s Gross Domestic Product (GDP). With the country opening up, avenues for foreign investment business travel has also taken off, all of which has acted as a catalyst for airline expansion.

In the last decade revenue growth has averaged 17.4 per cent in the aviation sector, two times higher than the 7.9 per cent average across Asia, according to the International Air Transport Association (IATA). Data from the Civil Aviation Authority of Vietnam shows that Vietnamese airlines transported 50 million passengers in 2018, five times more than in 2008. By December 2018, Vietnam’s aviation market had 68 foreign airlines from 25 countries and territories, along with five domestic airlines. In ten years the number of aircraft operated by local carriers has risen from 60 to 192 and in its latest report IATA ranks Vietnam as the fifth fastest growing aviation market in the world and the fastest in South-East Asia, forecasting average growth of nearly 14 per cent over the next five years, reaching 150 million passengers by 2035.

In the air right now are national flag carrier Vietnam Airlines (VNA), the VNA-Qantas joint venture budget operator Jetstar Pacific, boisterous and rapidly growing low-cost Vietjet Air, recent newcomer Bamboo Airways and smaller Vietstar Airlines. That may sound a lot for a relatively small country, but local aviation authorities and industry analysts are confident there is plenty of room for many more.

Vietnam has a population of around 100 million and they say you only need to compare it with neighbouring Thailand to get a glimpse of what is possible. Despite having only 72 per cent of Vietnam’s population, Thailand has four times more airlines and three times more international tourists. Thailand has 13 regular scheduled airlines and 10 charter companies and the number of airlines operating in Vietnam is much smaller than Singapore, Malaysia, the Philippines, Cambodia and Myanmar, and five times less than Indonesia. Thus, the local hopefuls are queuing up to get in on the act.

Kites Air, being developed by big local tourism firm, the Thiên Minh Group, has already been given approval to launch and expects to be flying next year, serving not only domestic routes but internationally through Indochina, South-East Asia and North Asia. Another travel agency, Vietnam Vietravel, also plans to launch in the first quarter of 2020 and yet another, the Vingroup, says it will get in on the act with Vinpearl Air, for which it says 30 aircraft will be purchased.

Neither have the opportunities been ignored by foreign interests. Asia’s biggest budget operation, Malaysia’s AirAsia group, has shown a lot of interest in setting up an AirAsia Vietnam, so far without success. Three attempts to reach a deal with local partners, including Vietjet, have come to nothing for various reasons. AirAsia’s group chief executive Tony Fernandes has indicated the idea is on the backburner for the time being but adds that nothing is off the agenda for the future. Besides, AirAsia and its various offshoots in Thailand, Japan, Indonesia and the Philippines have the market well covered, with some 17 routes connecting Vietnam with international destinations.

While encouraging new operators, Hanoi has also put some safeguards in place. A new carrier operating up to 10 aircraft will need to have a minimum capital, including ownership capital and loans, of A$19 million. Those with 11 to 30 aircraft will need to have $38 million while having a fleet of more than 30 will require $44.3 million.
‘IATA ranks Vietnam as the fifth fastest growing aviation market in the world’