Vietnam listed among the world’s fastest growing aviation market

VietNamNet Bridge – The International Air Transport Association (IATA) believes that Vietnam would be the third fastest growing market in terms of international passenger and cargo transport and the second fastest in domestic passenger transport.

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Though the GDP growth rate is just around 5 percent, the lowest over the last 13 years, the demand for air traveling in Vietnam still has witnessed the two digit growth rate, according to Reuters.

The high growth rate means the great opportunities for the world’s leading aircraft manufacturers namely Airbus, Boeing, Mitsubishi Aircraft, Bombardier or Embraer.

While ITAT has listed Vietnam among the fastest growing aviation markets, the Civil Aviation Authorities of Vietnam (CAAV) has predicted that the number of domestic passengers would increase by 15 percent this year, or double that of the last year, at 7 percent.

In order to obtain the growth rate, Vietnam may expand its fleet by two or three folds in just some more years, which would serve the domestic market with 90 consumers and the international passengers, the number of whom increases by 20 percent per annum.

In September, the Vietnamese airline--VietJet Air signed a memorandum of understanding on the purchase of 92 Airbus 320s worth $9.1 billion. It plans to list shares on Hong Kong or Singapore bourse by 2015 to mobilize capital that serves the business expansion.

VietJet Air plans to increase the number of aircrafts to 20, while it has been moving fast ahead with the plan to set up joint ventures with three airlines, including Thai KanAir, which may become operational by early 2014, and a Myanmar air carrier.

The Vietnamese national flag air carrier Vietnam Airlines also plans to expand its fleet by 28 percent to 101 aircrafts by 2015. It has ordered more Boeing 787 Dreamliner and Airbus 50.

Meanwhile, the spokesman of Jetstar Pacific said the airline plans to increase the number of aircrafts it has from five Airbus 320s to 16 in the next few years.

Aviation experts believe that the high potentials of the Vietnamese aviation market are mostly because of its geographical terrain. The country has the length of 1,650 kilometers, while big cities and tourist sites are located far from each other. Meanwhile, the road and railway infrastructure system remains weak.

Vietnam is just several fly hours away from Japan, South Korea, Hong Kong (China), Thailand and China. The number of tourists in the first nine months of the year was 5.5 million, an increase of 10 percent over the same period of 2012.

Therefore, Timothy Ross, an analyst from Credit Suisse Singapore, believes that VietJet Air has made a right decision to set up joint ventures with other airlines to develop the Vietnamese market.

He also noted that the competition in the market would be stiffer; Jetstar would have to struggle to make profit, while Vietnam Airlines should have made an IPO 3-5 years ago already.

However, analysts have warned that though being a very promising market, the airlines in the Vietnamese market now have to struggle hard to exist.

Doan Quoc Viet, President of BIM Group, a powerful conglomerate in the north, the owner of Air Mekong, revealed that the more Air Mekong flew, the bigger loss it incurred. The businessman finally decided to suspend the airline’s operation after a sleepless night.

Compiled by C. V

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