Vietnam’s Airline Industry Takes Off

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By Edward Barbour-Lacey

HANOI – According to the International Air Transport Association, over the next year Vietnam should become the world’s third-fastest growing market for international passengers and freight. It will also be the second-fastest growing market for domestic passengers.

In addition, Vietnam’s Department of Aviation has predicted that the country will see an increase of 15 percent in domestic passengers in 2013 (over double last year’s 7 percent growth rate).

The Vietnamese airline industry is currently quite small, but it is poised for massive growth with the domestic airlines planning to either double or even triple their fleets as they seek to service the country’s 90 million plus citizens over the next few years. Further, the fast growing tourist industry has been increasing at a 20 percent rate year-on-year.

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Industry analyst Brendan Sobie said Vietnam – along with Laos and Burma – are considered “frontier markets” with enormous potential for growth. As a result, international aircraft manufacturers such as Boeing and Airbus are finding Vietnam to be an increasingly attractive market.

An example of this growth can be seen in the case of Vietnam’s first private airline, VietJet Aviation Joint Stock Co, which has just placed an order worth US$9 billion for 92 Airbus jets. The airline is also looking to list itself on either the Hong Kong or Singapore stock exchanges in order to help its expansion.

Further, state-run flag carrier Vietnam Airlines is also preparing for its own IPO as it continues its expansion strategy.

Due to what VietJet’s Managing Director Luu Duc Khanh has termed Vietnam’s “fortune location,” the country is in a prime position to expand its air routes throughout Asia.  In the long-term, routes to the US are also being planned because of the country’s high level of Vietnamese expatriates.

The airline industry is particularly important for Vietnam due to the length of the country and the large distances between many of the country’s tourist locations. By August 2013, more than 138 million passengers traveled on Asia Pacific airlines throughout the region – a five percent increase over the last year.

Martin Craig, Pacific Asia Travel Association’s CEO, explains: “This massive increase in intra-Asian tourism and air travel is simply driven by the fact that so many more people are going into the so-called ‘middle-class’ status with discretionary income and one of the first things they want to spend their hard earned spare cash is on going overseas.”

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