Domestic airlines leave, foreign airlines flock to Vietnam

Finnair, a Finnish air carrier, the member of One World, the international airline alliance which provides more than 800 flights daily to 149 countries, has made its official presence in the Vietnamese market, choosing Bien Dong travel firm as the general agent.

The presence of Finnair in Vietnam marks a milestone in the development of the air carrier’s plan to expand the air routes to South East Asia. Retteri Kostemaa, South East Asia Business Director of Finnair, said the Asia with 11 destination points, now bring 65 percent of the total turnover of Finnair, while Vietnam is one of the most important markets.

He said that the airline is considering opening a direct route from Helsinki in the near future. Stemming from Vietnam, Finnair would team up with other airlines, including Vietnam Airlines, Cathay Pacific and Jetstar to create transit points--connecting with the airline’s flights to Helsinki, other domestic destinations in Finland and 60 European destinations.

Prior to that, a lot of other well-known airlines had announced the increases in the number of flights or the opening of new air routes to Vietnam. Filipino Cebu Pacific, for example, has opened the new air route Manila – Hanoi (2 flights a week).

In late March 2012, the US’ United and Japanese ANA announced the expansion of the trans-Pacific joint venture, which allows the two airlines to cooperate in terms of airfares, the networks on the Vietnam-US air route since April 1, 2012.

Cargo air carriers have also been eyeing Vietnam. In March 2012, Saudi Airlines Cargo (Saudi Arabia) began providing the cargo carrying service from HCM City to the Middle East and Frankfurt in Germany with the frequency of two flights a week.

Deputy Head of the Civil Aviation Authority of Vietnam (CAAV) Lai Xuan Thanh said the increase of the foreign airlines’ presence in Vietnam shows that they have been convinced by the Vietnamese potential market and attracted by the offered preferences.

Regarding the market potentials, Vietnam has a market with a relatively high growth rate. CAAV said in 2011, the Vietnamese market witnessed the growth rate of 14 percent. Meanwhile, the International Air Transport Association IATA has predicted that Vietnam would become the third fastest growing cargo and passenger carrying market in the world by 2014, just after China and Brazil.

It is expected that the Vietnamese market would have 34-36 million passengers by 2015, 52-59 million passengers by 2019. Meanwhile, the cargo transport would see a rapid increase to 850,000-930,000 tons by 2015 and 1.4-1.6 million tons by 2019.

Meanwhile, the Ministry of Finance has decided to slash the fees for some kinds of services, with the 50 percent reduction at the highest, applied to the airlines which for the first time open air routes to and from Vietnam; the airlines which exploit air routes to and from Vietnam during non-peak hours; and the Vietnam airlines which for the first time join the air transport market.

A paradox exists that while more and more foreign airlines have been flying to Vietnam, domestic airlines have given up the home market. Indochina Airlines has disappeared, while Trai Tien Air Cargo has had the license revoked because it could not prove its financial capability. Meanwhile, Air Mekong and Vietjet Air are still struggling to build up their brands.

Most recently, Jetstar Pacific has belonged to Vietnam Airlines with the 70 percent stake transfer. Prior to that, Jetstar Pacific had continuously taken loss. Meanwhile, Vietnam Airlines itself is also undergoing a restructuring process and planning for the equitization.

Source: TBKTSG