Since the abolition of state monopoly status in 2005, Vietnam’s aviation industry has become more vibrant with the emergence of three major airlines including Vietnam Airlines, Vietjet Air and Jetstar Pacific Airlines, with market share ratios of 41%, 43% and 14%, respectively.
According to assessments from many experts, Vietnam’s aviation industry in general is still underdeveloped compared to many countries in the region such as Thailand, Indonesia, Malaysia or the Philippines, with relatively few airlines and little competition. Although there are still many shortcomings, it is undeniable that the development and growth of aviation has created opportunities and become a driving force to promote the growth of many economic sectors of Vietnam, including tourism.
This simultaneous interaction has created a memorable milestone for both the aviation and tourism industry of Vietnam, with 2018 being considered a successful year for Vietnam in both fields.
Vietnam’s open sky
In 2018, Vietnam’s aviation market in general recorded stable growth, serving 106 million passengers, up 12.9% compared to 2017. In particular, Vietnamese airlines have transported more than 50 million passengers, representing an increase of 14% compared with the previous year.
Currently, the civil aviation market in Vietnam has the participation of 71 international airlines from 28 countries and territories worldwide, together with 4 Vietnamese carriers, Vietjet Air, Jetstar Pacific Airlines and VASCO, which are operating nearly 130 international routes linking Hanoi and Ho Chi Minh City, Danang, Nha Trang, Phu Quoc and Haiphong with 28 other countries and territories around the world.
In the domestic market, Vietnamese carriers are running 48 routes connecting Hanoi, Danang and Ho Chi Minh City with 18 local airports. The total air transport market of Vietnam in 2018 is estimated to have served 71.4 million passengers, an increase of 15% compared with 2017.
In preparation for its long-term take-off journey, Vietnam aviation has also implemented an “open sky” policy by welcoming the arrival of many private and joint venture airlines. In mid-2018, Vietnam’s aviation industry recognised the appearance of a new private airline owned by FLC Group called Bamboo Airways. Bamboo Airways aims to provide customers with the opportunity to access high-quality services. Dang Tat Thang, deputy general director of FLC Group and CEO of Bamboo Airways, said in the short term, Bamboo Airways will focus on routes connecting Northeast Asian territories, such as Japan, Korea, China, Singapore, Thailand, Hong Kong, Taiwan, and the Philippines to Vietnam’s Quy Nhon, Quang Ninh, Haiphong, Thanh Hoa, Phu Quoc and Nha Trang tourism spots.
Along with Bamboo Airway, Vietstar Airlines, which operates under the models of low-cost carrier (LCC) of ultra low-cost carrier (ULCC), is also completing the application process for permission to take off in 2019. The aviation market is expected to become even more vibrant in the future because by the end of December 2017, Malaysian low-cost carrier AirAsia joined hands with Thien Minh Travel JSC to launch a new low-cost airline in Vietnam after three failed attempts to penetrate the Vietnamese market. CEO of AirAsia Group Tony Fernandes asserts that Vietnam is the latest country to lure AirAsia, where this brand operates through a joint venture in low-cost aviation. “If AirAsia wants to be a true airline of Southeast Asia, we must affirm our presence in Vietnam,” he said at the Vietnam Travel & Tourism Summit 2018.
The positive changes in Vietnam’s aviation industry are also reflected in current aviation infrastructure investments such as the upgrading, renovation and building of new airports. Terminals T1 and T2 at Tan Son Nhat Airport (Ho Chi Minh City) have been expanded to increase capacity to about 30 million passengers a year, while T3 terminal will be built to accommodate 20 million visitors per year in the coming time.
Van Don International Airport (Quang Ninh), the first airport in Vietnam to be developed by the private sector, officially opened last December, promising to serve 5 million passengers a year by 2030.
Travel for visitors is set to become even easier in the near future, when several airlines begin operating a series of direct flights to attractive destinations around the world.
Data from the International Air Transport Association (IATA) shows that Vietnam’s aviation market was the serventh fastest growing in the world during the period 2013-2017, and is expected to become one of the five fastest-growing markets in the world in terms of additional passengers per year by 2035. The Civil Aviation Administration of Vietnam forecasts that the number of air passengers may reach 142 million by 2020, meaning an average growth rate of 14% in 2017-2020.
Positive impacts on tourism
The rapid development of the aviation market has boosted the strong growth of Vietnam’s tourism industry. According to statistics from the Vietnam National Administration of Tourism, 70-80% of passengers travel by plane for tourism purposes and the number of tourists to Vietnam arriving by air is a similar proportion.
In 2018, among 15.6 million international visitors and 80 million domestic tourists, as many as 11.4 million of them came to Vietnam by plane, up 15.3% over the same period in 2017 (as of November 2018). The total number of international arrivals to Vietnam has doubled over the last three years.
For the first time, Vietnam is ranked sixth among the world’s 10 fastest growing travel destinations by the United Nations World Tourism Organisation (UNWTO), and has been named as one of the world’s top destinations. This is the premise for Vietnam’s tourism industry to reach the goal of attracting 18 million international tourists and welcoming and serving 85 million domestic tourists with a total revenue of over VND700 trillion in tourism in 2019.
Vietnamese airlines are also keen to enter the tourism business, deploying methods such as leasing aircraft and offering attractive incentives for tour operators. Tours using air charter are flourishing, and Vietjet Air, is taking advantage of this opportunity.
The revenue of Vietjet from leasing air charter surged sharply from VND412 billion in 2014 to VND2.632 trillion in 2016. For Jetstar, the rent of charter flights is quite modest on domestic routes, while being far greater on international routes.
The introduction of charter flights also brings a large number of visitors to local destinations, especially major domestic tourism cities. Flights from Danang Airport connect with 20 destinations in the world, including 14 charter flights to the largest cities in China. Nha Trang also attracts foreign visitors thanks to charter flights, most of which are Russian and Chinese. Other potential routes have been evaluated with the launch of flights from destinations such as Can Tho, Dalat, Danang and Hue to Bangkok.
In 2019, tourism has the potential to become a spearhead economic sector of Vietnam providing there is a closer and more comprehensive connection with the aviation industry, especially in performing open-sky policy to private airlines, foreign airlines and developing more low-cost flights.
As Tony Fernandes once commented, “Many people believe that visitors who have come on low-cost flights will spend less. But customers buying business class often come and leave very quickly, while those who choose low-cost flights stay longer and spend more on eating, shopping and exploring.”