More airlines are queuing up for licenses

Bamboo Airways of FLC Group last November got an air transport license, officially becoming the fifth air carrier in Vietnam. CEO Dang Tat Thang said the airline has received the first aircraft and plans to have 20-30 more in 2019 before it gets delivery of 44 new aircraft under contracts signed with Airbus and Boeing.

Meanwhile, the government has asked the Ministry of Transport to consider the application of Vietstar Airlines. AirAsia has revealed a plan to set up an aviation alliance between AirAsia and Vietnam’s Hai Au. It is expected that the alliance will provide the first commercial flight in July or August 2019. 

Bloomberg cited sources as reporting that the joint venture would need investment capital of VND1 trillion, or $44 million.

According to IATA (The International Air Transport Association), Vietnam is the latest market attracting AirAsia in its campaign to develop the airline into a low-cost carrier for Asia.

With the number of air passengers in Vietnam growing by 28 percent, or three times higher than other ASEAN countries, Vietnam is expected to become the fifth fastest passenger growing market in the world in 2015-2035. 

The CAGR projected for Vietnam in that period is 6.7 percent per annum, higher than the world’s average rate of 3.9 percent and Asia-Pacific’s 4.6 percent.

FPT Securities, in its latest report, pointed out that the rapid development of Vietnam’s tourism (7.9 percent per annum in 2015-2020, the highest in the region), the expected increase in income per capita, and new wave of FDI investment will help foster aviation sector development.

FPT Securities’ researchers believe that now is the time for new air carriers to join the market when the oil price falls. With the expenses on fuel accounting for 30-40 percent of total expenditures, air carriers can expect business prosperity.

Though some private airlines had to leave the market just after a short period of operation, more investors want to join the market as they are encouraged by the prosperity of Vietjet Air. The air carrier reported pre-tax profit of VND3.868 trillion in the first nine months of the year.

Meanwhile, Tran Trong Kien, CEO of Thien Minh Group, believes that the Vietnamese market is large enough for 10 airlines.

Do Thien Anh Tuan, an economist, warned that new carriers would be at a disadvantage compared with veteran carriers. Bamboo Airways, for example, needs to raise its charter capital to VND1.3 trillion at minimum if it wants to operate 30 aircraft.

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