"Bottlenecks " of private airline businesses

Bamboo Airways is expected to launch its first commercial fight in 10/2018

Bamboo Airways of the FLC is planning to enter the aviation market with a powerful fleet of aircraft. Vietjet Air intends to buy more aircraft to serve its expansion plans.

Huge potential to develop

According to Mr. Huynh The Du, lecturer at the Fulbright School of Public Policy and Management, in 2017, Vietnam's aviation industry achieved sales of 121,120 billion VND, increasing by 24% compared to the previous year, serving 46.39 million of passengers. The rate of international visitors to Vietnam by air has increased rapidly from 78.9% in 2015 to nearly 85% in 2017.

With the strong growth of the aviation industry, the demand for this means of travel has also increased rapidly, especially from 2013 to 2016. While the growth in 2013 is nearly 7 times higher, the figure is 16 times higher in 2016.

The aviation industry is completely no longer a monopoly, but still dominates the market. Vietnam Airlines is still leading with a market share of 40%, followed by Vietjet Air with 27%, followed by Jetstar Pacific with 10%. Vasco and other foreign airlines are the rest.

Mr. Le Anh Tuan, Head of Infrastructure Department, Development Strategy Institute (Ministry of Planning and Investment) affirmed that the state has paid much attention to investing in aviation infrastructure development. Specifically, investment in infrastructure for aviation accounts for 30% of the total priority projects, which accounts for nearly 20% of transport infrastructure. A while ago, the Prime Minister approved the master plan for aviation development, striving to have 23 airports by 2020, and 28 airports by 2030.

“In addition to infrastructure, it is expected to reach a fleet of 220 aircraft by 2020 and nearly double by 2030. The concern and prosperity for aviation development is enormous, especially for airlines and investors,” Mr. Tuan stressed.

Promoting the development of the aviation industry is an effective strategy for boosting economic growth, as growth in aviation is always much greater than economic growth. In addition, the aviation growth will not only directly contribute a great value to the economy, but also support other economic sectors such as tourism, hotels and real estate development.

Despite the great development and potential, the aviation infrastructure has not met requirements, there are many bottlenecks, especially aviation infrastructure in areas that are being planned to be large tourism centers of the country, and the participation of private enterprises when investing in aviation services will be a matter forcing private enterprises to take into account.

Need a proper policy

Mr. Do Duc Tu, Department of Infrastructure and Urban Planning (Ministry of Planning and Investment) said that one of the causes leading to the congestion of infrastructure is due to a surge of over 16% in the number of passengers through the Vietnam airports, higher than the world average, leading to airport congestion. The infrastructure overload is not only happening in central metropolitan areas, but also in many local airports such as Thanh Hoa, Quy Nhon and Quang Binh.

Currently, some airports such as Van Don International Airport, Phan Thiet Airport, Da Nang International Terminal, Cam Ranh International Terminal... are invested by the private sector. According to the Decree No. 92/2016/ND-CP of the Government regulating conditional business lines in the field of civil aviation, private investors have been allowed to invest 100% of capital instead of only 30% of the capital for an airport as in the previous regulations, which has attracted private investors.

However, according to Mr. Tu, the State should have certain support mechanisms for airport projects, such as for the case of the Van Don airport project, how to make it financially feasible to help investors recover capital and be profitable. The support depends on each project, each area. For example, in areas such as Quang Ninh, investors only need to be supported in land clearance, but in the areas which have less potential, such as in Quang Binh, the level of support should be higher. At the same time, investors need to be supported in the aviation specialty, with the support of the Vietnam Aviation Administration (the Ministry of Transport).

In particular, the most important thing is that the state when it has approved the investment policy, must have clear administrative procedures for the project to be implemented quickly.

One of the challenges that is facing the aviation industry is the infrastructure problem, especially in key areas. An analysis of bottlenecks in aviation investment by Mr. Nguyen Thien Tong, former Head of Aviation Engineering, Ho Chi Minh City University of Techonology, and former head of the research group for the Tan Son Nhat Airport expansion plan, said that there should be a national policy on civil aviation. Accordingly, the policy must be clear to attract private investment in aviation development, socialization of airport investment.