Vietnam's airline industry on course to become world's third-fastest growing
Vietnam’s fledgling airline industry is poised for a boom as local competition heats up with fleet expansions, new routes and planned share offers that are set to make it one of the world’s three fastest-growing markets.
Even as the local economy chugs along at about 5 per cent growth, its slowest pace in 13 years, demand for domestic air travel is growing by double digits. That is translating into a surprisingly robust new source of business for Boeing, Airbus and makers of regional aircraft, such as Mitsubishi Aircraft, Bombardier and Embraer.
The International Air Transport Association expects Vietnam to become the world’s third-fastest growing market for international passengers and freight next year, and second-fastest for domestic passengers.
Vietnam’s Aviation Department expects 15 per cent growth in domestic passengers this year, more than double last year’s 7 per cent rise.
Though starting from a low base, Vietnam’s carriers will boost their fleets in the next few years, doubling or tripling them to serve a domestic market of 90 million people and tourist arrivals growing 20 per cent annually on average.
VietJet Aviation, Vietnam’s first private airline, agreed last month to a provisional order for up to 92 Airbus jets worth US$9 billion at list prices.
The low-cost carrier is aiming for a stock market listing in either Hong Kong or Singapore in 2015 to fund the expansion, which would start with flights to Tokyo, Beijing, Singapore, Kuala Lumpur and South Korea, then eventually Russia and Australia and beyond, managing director Luu Duc Khanh said.
“Further, it could be the United States, where four million people of Vietnamese origin live. They’re waiting for VietJet anxiously,” he said.VietJet plans to double its fleet by 2015 to 20 jets and is speeding up work to get three joint ventures in the air, including one with an undisclosed carrier in Myanmar and another agreed with Thailand’s KanAir, to operate early next year.
VietJet’s bold expansion after less than two years in business could raise the stakes not only at home but in Southeast Asia’s fast-growing low-cost market, dominated by Malaysia’s AirAsia and Indonesia’s Lion Air.
Those ambitious plans may have shaken state-run flag carrier Vietnam Airlines (VNA) into expediting its long-awaited initial public offering and fleet expansion.
VNA dominates the local market and will increase its fleet by 28 per cent to 101 aircraft by 2015. It has been preparing for an IPO in the second quarter of next year.
“The project is right on schedule,” said spokesman Le Truong Giang.
Its fleet includes both Airbus and Boeing jets, and it has ordered the Boeing 787 Dreamliner and the Airbus A350.
The airline also has its hand in the low-cost market through a stake in JetStar Pacific, a joint venture with Australia’s Qantas Airways. JetStar plans to more than triple its fleet of five Airbus A320s to 16 in the next few years, a spokesman said.
The airlines and industry experts say the growth potential comes mainly from Vietnam’s topography and what Khanh of VietJet called a “[fortunate] location”.
Vietnam is 1,650 kilometres in length, its biggest cities and tourist resorts are far apart, and it has poor road and rail infrastructure.
It is also within a few hours of Japan, South Korea, Hong Kong, Thailand and China, and tourist arrivals are rising, with 5.5 million in the first nine months of the year, a 10 per cent increase from the same period last year.