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Aviation market takes first step into future market
VietJet Air, the first private aviation firm in Vietnam was recently licensed, putting an end to Vietnam and Pacific Airline’s monopoly on the domestic air transport market.
Aviation goes privatization
According to Minister of Transportation Ho Nghia Dung, Vietnam’s aviation market has grown much in recent years. The air transport growth rate is 2.5 times greater than that of the entire transportation sector. The Transport Ministry has drafted a development strategy for aviation through 2020.
“Our strategy emphasizes investment in three fields: infrastructure, air crews and air services. A private carrier will bring healthy competition to the market and resultantly, needed improvements,” Dung said.
Based on this opinion, VietJet Air was licensed immediately after the amended Law on Civil Aviation took effect. With legal capital of VND600 billion (US$37.5 million), the new carrier will offer both domestic and international flights.
VietJet Air Director General, Nguyen Duc Tam, said his company hasn’t signed any aircraft lease contracts but plans to use Boeing 737s or Airbus A320s.
The carrier plans to conduct its first commercial flight between Hanoi and HCM City in late 2008 or early 2009. The firm plans to offer various destinations, including Hanoi, HCM City, Da Nang, Bangkok, Hong Kong and Singapore and perhaps North Korea and Japan in the future.
What a bunch of carriers
Once VietJet Air officially takes off in late 2008, a trisect market of Vietnam Airlines, Pacific Airlines and VietJet Air will be created.
Vietnam Airlines, total capital nearly VND6 trillion (US$375 million), dominates the domestic air transport market, 80%. This may change when the third, but first private, airline takes flight.
Robert Hughes, Managing Director of VietJet Air, isn’t embarrassed about his ambitions to ‘rescue’ part of the market from the national carriers.
“Some economic sectors have been equitized, including aviation. Equitization will improve the aviation market and allow higher productivity,” Hughes said.
The birth of VietJet Air will pave the way for the establishment of other private airliners. Prime Minister Nguyen Tan Dung recently agreed to discuss the establishment of Phu Quoc Airlines. Some private investors have also said they are preparing to set up new carriers, for example T&C Investment Joint Stock Company.
The Vietnam Civil Aviation Administration has submitted the aviation development policy to the Government, which says that from now to 2010, Vietnam should have 2-3 airlines and the government should prioritize the licensing of domestic airways.
To reach the goal of ranking third in the Southeast Asian region, Prime Minister Dung said Vietnam needs more airlines to create a highly competitive aviation market.
Vietnam Airlines last week signed a contract to buy 30 Airbus aircraft. This is a sign the national air carrier is preparing for heavier, fiercer competition.
To create a healthy playfield for the aviation market, adequate infrastructure is key. According to Government plans, Vietnam will have the largest international airport in Southeast Asia by 2010 - the 5,000ha, US$4 billion Long Thanh Airport in the southern province of Dong Nai, as well as a regional cargo transit airport in Chu Lai in the northern province of Quang Nam. Vietnam will also develop and expand various aviation services.
VNN
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