In the opening days of 2019, Vietnam’s aviation market welcomed a new carrier - the FLC Group’s Bamboo Airways - with its first commercial flight, from Ho Chi Minh City to Hanoi, taking off on January 16. Industry analysts said that the arrival of Bamboo Airways provides passengers with yet another choice when making travel plans and makes the country’s aviation market even more competitive.

Vietnam’s aviation market catered to an estimated 71.4 million passengers in 2018, an increase of 15 per cent against 2017, of which Vietnamese carriers ferried more than 50 million passengers, up 14 per cent, according to figures from the Civil Aviation Authority of Vietnam (CAAV). The market now has 68 foreign airlines from 25 countries and territories and Vietnamese airlines such as Vietnam Airlines, Vietjet Air, Jetstar Pacific Airlines, VASCO, and Bamboo Airways. These figures clearly indicate that Vietnam’s aviation market is now more vibrant than ever.

Crowded skies

Established in 2017, Bamboo Airways has charter capital of VND700 billion ($31.1 million) and plans to operate 37 routes this year, connecting major cities and popular tourist destinations. It will conduct 60 domestic flights each day and in subsequent years will add international flights to Japan, South Korea, China, Thailand, Hong Kong, and Taiwan (China). By 2023 it will open long-haul routes to the Americas, Europe, and Africa. 

Unlike other Vietnamese carriers, Bamboo Airways is operated under a new hybrid model combining traditional and low-cost models. After two years of preparations, its research found that passengers in northern provinces looking to head south must always go via Noi Bai International Airport, while those in the south must always go via Tan Son Nhat International Airport. This is one of the reasons why airports suffer from overloading and are bottlenecks in Vietnam’s aviation infrastructure.

“Airlines are currently focused on ‘golden routes’ that are super-profitable, like Hanoi - Ho Chi Minh City, creating overload at Noi Bai and Tan Son Nhat, while many other airports don’t use their full capacity,” said Mr. Trinh Van Quyet, Chairman of the FLC Group, when talking about Bamboo Airways’ strategy. “We will enter the niche market of short local flights.”

New routes have also been introduced by foreign carriers. Bangkok Airways, for example, began operating four non-stop return flights weekly between Bangkok’s Suvarnabhumi Airport and Cam Ranh International Airport on January 25, using 144-seat Airbus 319 aircraft.

“With so many international resorts to open over the next few years, coupled with excellent infrastructure and tourism growth, Cam Ranh will soon rival the likes of Da Nang, Phuket, and even Bali as among Asia’s best beach destinations,” said Mr. Sulaiman Zainul Abidin, Cam Ranh International Airport’s Deputy General Director and Chief Operating Officer.

South Korea’s largest low-cost carrier, Jeju Air, opened flights connecting Da Nang with Daegu on December 22, with a frequency of seven flights a week, and will increase flights from Muan to Da Nang to seven flights a week. “This new route is part of Jeju Air’s strategy to make it easier for South Koreans to travel to Vietnam, as demand has increased remarkably in recent years,” said Mr. Seong-Jin Yang, Managing Director and Head of Public Relations at Jeju Air. “Da Nang is a very popular destination among South Koreans.”

AirAsia, meanwhile, has kicked off flights connecting Kuala Lumpur and Phu Quoc Island, with a frequency of four flights per week. Mr. Laddawan Meesupwatana, AirAsia Group Head of Product, Indochina Market, told VET that in terms of inbound traffic, Vietnam has underserved destinations with huge tourism potential, such as Nha Trang and Phu Quoc, so AirAsia has introduced services from Kuala Lumpur.

The two airlines with the majority of market share in Vietnam, Vietnam Airlines and Vietjet Air, also continually open new domestic and international routes.

According to the International Air Transport Association (IATA), Vietnam will become the fifth-highest growing aviation market in the world in terms of international arrivals and cargo, while the number of local people traveling by air continues to increase rapidly. With a population of nearly 100 million, domestic aviation is expected to increase by an average of 15 per cent each year in the near future.

Mr. Meesupwatana said that purchasing power in the country is promising, bolstered by a burgeoning middle-class, which attracts not only AirAsia but also many other foreign carriers and other companies. “Vietnam is one of the fastest-growing aviation markets globally, averaging 17.4 per cent over the last decade and far higher than the 7.9 per cent recorded in the Asia-Pacific,” he added. “Vietnam has also made considerable progress in numerous infrastructure projects, including the development of airport facilities that allow airlines like AirAsia to expand.”

Meanwhile, a representative from Switzerland’s Edelweiss Air airlines, which has opened twice-weekly non-stop flights from Zurich to Ho Chi Minh City, told VET that the launch of the connection is a great addition to its route network as Vietnam offers an attractive and diverse mix of culture, natural beauty, beaches, food, and much more.

Figures from the Vietnam National Administration of Tourism (VNAT) show that Vietnam welcomed about 15.6 million international visitors in 2018, an increase of 2.7 million visitors compared to 2017, and catered to 80 million domestic tourists, an increase of 6.8 million. Arrivals by air stood at 12.5 million. “Aviation and tourism are two areas that cannot be separated,” said Mr. Quyet. “If a country’s aviation industry develops, so must its tourism industry.”

Bottlenecks and solutions

Vietnam’s aviation market is becoming more attractive but overloading at certain airports has also affected its development. Tan Son Nhat, for example, is operating at 130 per cent capacity, according to CAAV. 

The Authority has also noted that this overloading concerns many international carriers, reducing the frequency of flights to Vietnam. One Russian airline asked to cut its flights to Tan Son Nhat and proposed studying the possibility of using Lien Khuong Airport in the central highlands’ Lam Dong province and Tuy Hoa Airport in south-central Phu Yen province. The UAE’s Etihad Airlines, meanwhile, announced it will reduce flights to Ho Chi Minh City from seven per week to four due to the difficulties.

Although many foreign airlines have opened new routes to Vietnam in recent times, none are going to Tan Son Nhat or Noi Bai. “This year saw major airports serving passenger numbers well in excess of their designed capacity,” said Mr. Meesupwatana. “Tan Son Nhat exceeds its capacity by 40.7 per cent, which presents any airline, including AirAsia, with challenges to open routes or increase frequency.”

Expansions to existing airports and the construction of new ones would resolve such issues. Last October, a decision was announced to adjust the detailed planning for Tan Son Nhat in the 2020-2030 period, increasing it to 791 ha. After completion, the airport would reach the level of 4E for commercial airports and level 1 for military airports, with capacity to reach 50 million passengers each year and cargo volumes around 1 million tons each year.

The Long Thanh International Airport, which will serve Ho Chi Minh City, will be completed and put into operation by the end of 2025. The project consists of three phases with total investment of $16 billion, and will have a capacity of 25 million passengers per year. Pressure on Tan Son Nhat will then be substantially eased.

Meanwhile, at a meeting with the Ministry of Transport (MoT) in April 2018, the Hanoi People’s Committee requested the ministry complete its planning to expand Noi Bai. MoT then reported to the Prime Minister for permission to carry out site clearance as planned.

Also in the north, Van Don International Airport in Quang Ninh province, invested by the Sun Group, is expected to have a capacity of 2 million passengers per year in the first phase and 5 million by 2030. Construction began in March 2016 in the form of build-operate-transfer (BOT), and it was officially opened on December 30, 2018.

CAAV has forecast that passenger arrivals in early 2019 will increase by about 14 per cent over the same period last year and reach 142 million in 2020, for average annual growth of 14 per cent.

VN Economic Times