Going against the current
The domestic and international investors in attendance could not stop applauding after VietJet CEO Nguyen Thi Phuong Thao and her associates concluded the question-and-answer session at a recent ceremony in Ho Chi Minh City about the company’s proposed initial public offering this year.
Though they were responding to Thao’s news, in the background was a shared admiration for the results that Vietnam’s premier budget airline has posted since its debut several years ago.
As part of its promotional campaign, VietJet also held a string of successful roadshows in London, Hong Kong, Singapore, France, and Thailand, with support from global financial institutions including BNP Paribas, Deutsche Bank, and JP Morgan.
The numbers VietJet exhibited were built on the 44 per cent of the domestic passenger market they occupied through June 2016. After two years in operation they started to turn a profit; from 2013-2016 seat occupancy stood at 88-89 per cent, surprising even international aviation experts.
Behind the success was a new approach. VietJet did not focus on pricing as the top factor in realising its market share ambitions; instead it concentrated on tapping new markets and attracting fresh customers.
The airline’s upbeat business figures have driven away long-standing prejudices in the domestic aviation industry that aviation is not a field to turn a quick profit in – profits usually come after five or 10 years of operation. There was also a hard-to-kill belief that aviation needed to target affluent markets, and could hardly be accessible to the masses.
Part of the entrepreneurial generation that came of age in the 1970s, Thao has built a reputation by leveraging her strong ambition, confidence, and strategic thinking and management expertise. In this way, she has far surpassed many of her contemporaries. But her ambitions do not end with the Vietnamese field.
“VietJet is oriented to become a global international airline,” Thao said. “Our business indexes on the airline’s performance, safety, and services – counting technical safety levels, flying hours, and passenger seat factors – VietJet is among the world’s top performers. Based upon these metrics, I’m highly confident that VietJet is well-positioned to conquer the global sky.”
But not to be overlooked is Thao’s influence on the Vietnamese horizon, and the inspiration her story has provided for young local entrepreneurs.
|The eight advantages of VietJet
1-Being the fastest growing airline based in the Asia-Pacific region
2-The government provides active support for the aviation sector
3-Being the leading budget carrier in Vietnam
4-Possessing a competitive cost structure, which allows the firm to compete with other players in the international market
5-Having healthy finances and high operational efficiency
6-Generating added income from sources such as freight transport, added luggage service, and other value-added services like seat selection, ticket upgrades, and tourism insurance
7-Having earned strong brand recognition
8-Its experienced management team contains high-profile aviation experts and successful entrepreneurs
Promoting a new model
It was not a straight route to success. “To compete in today’s challenging business environment, VietJet had to carefully consider its business plan and find a more suitable growth path,” Thao said.
“The new path began with a shift from a five-star business model to a new-generation airline model, allowing passengers to self-select the services they want to use, instead of including everything in the base ticket cost.”
Sorting out the right growth model is crucial to the success of an airline. Indochina Airlines and Air Mekong, two other domestic airline ventures that launched alongside of VietJet, are now defunct.
VietJet, on the other hand, was shortlisted in its first year for the “Top 5 Best New Route Launch” at London’s Budgies and Travel Awards ceremony.
The airline posted profits in its second year of operation, and in its third year, VietJet became the first private Vietnamese airline to fly to international destinations and form foreign joint ventures. Its revenue in its fifth year tripled that of its third year.
This success had precedent, although not one in the aviation industry. Before venturing into this highly challenging and risky field, Thao was already a highly successful entrepreneur.
After more than two decades of activity, Thao had become well known in investors’ circles through a string of major merger and acquisition deals in banking and real estate.
She was the founder of Vietnam’s first commercial joint stock bank and is the owner of Danang’s Furama Resort, one of the premier resort properties in Vietnam.
“Many people had advised us not to venture into such a challenging field as aviation, but this could not affect our firm commitment,” Thao said. “I have trust in the government and the Ministry of Transport’s policy supporting private sector development, and on the other hand I want to prove this truth: Vietnam can compete head-on with other global players.”
The aviation model Thao and her associates now pursue is a mixed low-cost and traditional service-style combination, a new-generation model. Accordingly, VietJet is being governed in such a way that ensures cost optimisation, in concert with the use of high-tech applications which help save in manpower costs.
“I think aviation is an eye-catching field,” Thao said. “We have earned a good deal of attention from the general public, as well as from business observers who say that VietJet has grown too fast. But in fact, we had five years for planning before receiving our business licence, and another five years for preparations before taking wing. That 15-year path is not too short, and our growth is all pre-planned.”
Think globally, act locally
Thao’s talents do not lie only in her vision. VietJet’s CEO has her finger on VietJet’s development every day, and every hour. People at VietJet have become accustomed to the fact that the office of their CEO is often lit until 2-3am, including on weekends and holidays.
The CEO also remains accessible to her flight corps. Thao has never refused to take photos with an employee, though she might not know what position these people hold in VietJet’s several-thousand-strong workforce.
This business culture is visible everywhere at VietJet’s workplace, where the concept of ‘friendliness’ translates into sincerity and a willingness to listen to and support customers and colleagues as they are their family members.
Aircraft maintenance workers tell a moving story of a field visit made by Thao and some other executives, at an airport in peak season on a year-end night. During that trip, Thao did the cleaning work on her own with a vacuum cleaner, even picking up debris from the aircraft floor.
And, after learning of the diligence of one veteran staff member, she immediately called human resources and asked them to increase the employee’s salary.
She inspires her corps through more than just a peerless work ethic. VietJet employees have learned active thinking from their CEO – which has been useful in the difficulties VietJet has faced, and in determining the company’s future development.
“Our target is low operating costs but high-class quality,” Thao said. “Competition will serve as a motivating force for VietJet to perfect itself and better serve the community.”