New players eye up benefits from nation’s aviation recovery

The Civil Aviation Administration of Vietnam (CAAV) last week discussed two requests for licences to set up new air carriers. The first came from Imex Pan Pacific Group (IPPG), which wants to establish a cargo airline; and the other from a luxury resort group, proposing to operate charter flights from Thailand, Singapore, China, South Korea, Japan, and more to Vietnam.

After its meeting for the appraisal of the two requests on February 14, the CAAV reported the results to the Ministry of Transport.

A representative from the ministry said that while the aviation market in Vietnam and globally is recovering, the CAAV needs to assess the overall market soon and propose plans to have enough grounds for future licensing. “Although the aviation market has many signals of recovery, whether there should be new airlines also needs the green light from the government,” he noted.

Some experts said that now is the appropriate time for new licences. With Document No.5833/VPCP-CN from July 2020, the government stated that the establishment of a new airline would only be considered after the recovery of the aviation market, which begins now.

The CAAV said that Vietnam’s aviation market is bouncing back. Initially, the domestic market would be in the focus, before the roadmap targets the international arena amid the reopening of tourism, which is currently hoped to take place before March 30 or April 30 at the latest.

At present, international tourists, Vietnamese nationals, and overseas Vietnamese can enter the country on regular flights from Japan, South Korea, Singapore, Thailand, the United States, Australia, the United Kingdom, Russia, and several more.

Tourist arrivals are also rising again. Between January 1 and February 7, international arrivals reached over 118,000 passengers. In the domestic market, air travel demand has grown significantly since the beginning of the year.

Domestic air travellers in January hit four million passengers, with over 1.7 million travelling by air in the first week of the Lunar New Year, similar to the figure in the same period of 2020.

With the reopening tourism in the gun barrel, the luxury resort group – once licensed – will benefit much from charter flights, as international tourists are waiting for their turn to travel.

The licence would also enable IPPG chairman Johnathan Hanh Nguyen to venture afield into the aviation market. IPPG is one of the leading retailers in Vietnam, occupying 70 per cent of Vietnam’s luxury market with around 100 prestigious international brands in its portfolio. The group has seized 17 subsidiaries and 18 joint ventures since its establishment in 1985.

Nguyen said, “The more demand for transportation, the higher the freight costs, while 88 per cent of the air freight market share is held by foreign airlines. Those carriers can set their own pricing since they are nearly alone in the market, with no competition. If I do not do anything, the demand for air freight will remain congested, and price volatility will make it tough for domestic export-import businesses.”

Vietnam still lacks specialised cargo airlines. Domestic airlines have recently expanded freight delivery by passenger aircraft, although this is merely a short-term solution, fighting fires only during the current oversupply of aircraft.

Since mid-2020, Vietnam has established no new airlines. The country boasts now six air carriers as well as four other businesses with general aviation business licences – Vietstar Airlines, Blue Sky Air, Vietnam Helicopters, and Hai Au Aviation.

According to the Vietnam Aviation Business Association, if the sector grows by 2.5 per cent, it would contribute to stimulating national GDP growth by 1 per cent. Before the pandemic, Vietnam’s annual air transport revenues grew by 15-20 per cent.

The Airports Council International anticipated that, by 2040, Vietnam could have an average annual passenger growth rate of 6.2 per cent, the highest in the world, thanks to the rise of the middle class and the development of airlines.