Vietnam - Country Commercial Guide
Aviation

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2021-09-15

Overview

Before 2020, Vietnam was the world’s seventh fastest growing aviation market wit average growth of 15.9 percent in passenger and 13.8 percent in cargo. In 2020, Vietnam’s aviation industry has been severely impacted by the coronavirus pandemic with a loss of USD 782.6 million from transportation operation and declining revenue of USD 4.35 billion in comparison to the previous year.

According to the Civil Aviation Administration of Vietnam (CAAV), the agency under the Ministry of Transport (MOT) that regulates the aviation industry, Vietnam has experienced a negative growth rate for the first time,  with a  43.4 percent decline in passengers,a 15.6 percent decline in cargo, and a 43.5 percent  decline in air navigation services compared to 2019. In 2020, Vietnam’s airports welcomed 66 million passengers, 1.3 million tons of cargo, and navigated 423,399 flights.

From 2020 to 2030, CAAV estimates the average annual growth rate will reach 7.5-8.5 percent for passenger and 8.4 - 9.7 percent for freight traffic. By 2030, passenger air traffic is forecasted to at 280 million per year and freight traffic is at 6,8 million per year while designed capacity will reach 308 million passengers per year and 7.5 million tons of cargo per year. In order to respond to growing demand, Vietnam is making large investments in airport construction and upgrades, air traffic service enhancements, aircraft maintenance, overhaul capacity, and service development, which all present opportunities for U.S. companies

On February 15th, 2019, Vietnam was officially granted Category 1 status by the U.S. Federal Aviation Administration (FAA), setting the stage for direct flights to the United States.

Leading Sub-Sectors

Air Fleet Development

The six main commercial airlines, Vietnam Airlines, Pacific Airlines, VietJet Air, Bamboo Airways, Vietravel Airlines and Vietnam Air Services Company (Vasco), currently operate 227 aircrafts; of which 54 of these aircrafts are owned by the airlines. TVietnamese airlines’ COVID-19 contingency measures, which include operating repatriation flights, reconfiguring passenger aircraft to transport cargo, introducing steep discounts on domestic routes, diversifying revenue streams, and receiving government tax and fees reductions, helped the airlines avert bankruptcy during the pandemic.  However, the future of the airline industry remains difficulties as it has no room for further recovery until international flights are reopened. To cope with difficulties during pandemic, the Vietnamese Government banned the establishment of new airline until 2022.

According to 2021 Commercial Aviation Fleet & MRO forecast, Vietnam’s fleet will reach 521 aircrafts by 2030 at CAGR of 9.6 percent (compared to 3.4 percent of Asia Pacific).

Vietnam Airlines:

The national flag carrier operates 99 aircrafts with an average fleet age of 6.5 years. In 2020, Vietnam Airlines suffered losses of over USD 480 million and will obtain over USD 518 million in refinancing loans from the Vietnamese Government in 2021. To survive, Vietnam Airlines quickly compensated by increasing the number of international cargo flights and repatriation flights. In March 2021, Vietnam Airlines approved plans to launch direct routes to the United States by the end of 2021, which will be implemented in two phases. The first phase  of repatriation flights plans to start with one flight per week between Ho Chi Minh City and San Francisco, followed by  accessing the market for further launches of the second phase - commercial operation.

VietJet: A privately owned low-cost carrier (LCC), VietJet operates 79 aircrafts with an average age of 4.6 years. VietJet has reporteda profit of USD 3 million in 2020 thanks to the good performance of cargo operations and diversified revenue streams including the opening of a special ground service center at Noi Bai International Airport and operational expenses cutting. The airline also established interline agreements with other carriers, extending its cargo network to Europe and the U.S. A notable engagement includes a deal established with UPS, signed in November 2020.

Jetstar Pacific: In June 2020, Vietnam Airlines announced plans to increase its ownership of Jetstar Pacific to 98 percent by taking over 30 percent of Qantas’ shares in Jetstar Pacific Joint venture and rebranded Jetstar Pacific to Pacific Airlines. The fleet currently consists of fifteen A320-200, with an average fleet age of 4.5 years.

Vietnam Air Services Company (VASCO): VASCO is owned by Vietnam Airlines and began operating in 1987 with aerial photography and geological survey flights. The airline expanded into providing passenger services in 2004 and has nine domestic routes. VASCO currently operates five ATR72 aircrafts, with average fleet age of 9.8 years.

Bamboo Airways: A hybrid carrier owned by Vietnamese property developer FLC Group. Bamboo Airways currently operates 19 Airbus aircrafts, three Boeing 787 Dreamliners and four small E195 aircrafts, bringing its fleet to 26 with an average age of 7.4 years. Bamboo Airways have had impressive results with pre-tax profit of 17.4 million USD. The profit is said to be coming from its signature 5-star flight-resort-golf packages, combined with FLC Group ecosystem. The airline is currently taking steps to launch direct flights to the U.S.

Vietstar Airlines: a subsidiary of Vietravel, the biggest Vietnamese tour operator, has just launched its first commercial flight in January 2021 with its base in Hue province. The airline has three Airbus A321 with an average age of 6.2 years.

Airport Development

Vietnam has 22 airports, of which 10 are international and 12 are domestic.  Airports Corporation of Vietnam (ACV), the largest airport operator in Vietnam with 95.4 percent state-owned shares, currently manages and operates a network of 21 airports throughout the country. Van Don Airport is the first private airport in the country, built and operated by Sun Group.

The total designed capacity of airports in Vietnam is 89.8 million passengers annualy, while the volume of passengers through airports in 2019 was 112 million. Key airport hubs like Tan Son Nhat (HCMC) and Noi Bai (Hanoi) are overburdened, creating pressure on management, safety issues, and flight delays.

Under Decision No. 236 / QD-TTg dated February 23, 2018, Vietnam’s Prime Minister approved the adjustment of the Vietnam Aviation Development Master Plan to 2020 with vision to 2030, setting a key priority for airport infrastructure investment by investing in the construction of six new airports and upgrading most tourism hub airports with a total investment of approximately USD 16 billion,increasing total airports to 28 (13 international and 15 domestic airports). By 2030, the total passenger volume through airports is forecasted to reach 280 mpa and the total cargo volumes will reach 6.8 million tons/year while designed capacity will reach 308 mpa and 7.5 million tons of cargo per year.

Anticipated airport infrastructure  investments, upgradese, and expansions in the time period between 2021-2030 are as follow:

  • New construction at USD 4.72 billion- 25mpa Long Thanh International Airport- Phase 1 (2021-2025)
  • (Phase one of the airport will include a 4km long and 75m wide runway, a taxiway and apron system, a 25mpa passenger terminal, 1.2 million ton cargo terminal and an air traffic control tower. Ground was broken in January 2021).
  • New USD 472mn- 20mpa T3 Terminal at Tan Son Nhat International Airport (2021-2023)
  • New USD 490mn- 20mpa T3 terminal at Noi Bai International Airport and T2 expansion plan.
  • New USD 427mn- 10mpa T3 terminal at Da Nang International Airport,
  • Reconstructing USD 206.2mn Dien Bien Airport,
  • New construction of Phan Thiet, Sa Pa, Quang Tri, Lai Chau airports

Legal provision in investment and funding are key obstacles to aviation infrastructure projects. ACV and many private investors like Imex Pan Pacific Group, FLC Group, Vietjet Air  or T&T Group are in line waiting for government approval to invest in Vietnam airport infrastructure projects using state owned capital or other sources of investment (PPP, BOT, BT). The public private partnership investment is a breakthrough solution to reduce pressure on the state budget and increase competitiveness of the economy. This will also allow the country to exploit the best technologies and services from many countries in its airport development projects, and thus provide more opportunities for U.S. aviation companies in supplying airport technologies and services. In response to increasing calls to promote private sector investments and shift from government ownership and operation to private participation in the airport and aviation infrastructure sector in Vietnam, The Vietnamese government recently issued Decree No. 05/2021/ND-CP on the management and operation of airports and airfields in Vietnam, replacing Decree No. 102/2015/ND-CP. The new decree, effected on March 10, 2021, provides new regulations regarding the investment and operation of airport and airfield projects in Vietnam with certain foundations to facilitate new opportunities for private investment. To facilitate this Decree, CAAV is also working on the study “Orientation to promote private investment in Vietnam aviation infrastructure investment” which CAAV proposes Public Private Partnership Investment model for 6 airports including Dong Hoi, Rach Gia, Ca Mau, Sapa, Lai Chau and Quang Tri.

Air Traffic Management

Vietnam Air Traffic Management (VATM), under MOT, provides air navigation services for civil and military aircrafts operating  in the Flight Information Regions (FIRs) of Vietnam (including FIR Hanoi and Ho Chi Minh) and at  airports nation-wide, covering 23 domestic routes and 32 international routes. 

In 2020, VATM provided air navigation services for 423,399 flights, a decrease of 43.5 percent compared to 2019. By 2030, VATM aims to provide air navigation services to 2.5 million flights (without a COVID-19 scenario). 

VATM plans to modernize its facilities by investing in:

USD 480 million CNS/ATM (Communication, navigation and surveillance systems/Air Traffic Management) development project (2020-2030) (In February 2018, VATM has worked with Mitre, co-funded by USTDA to  develop Air Traffic Flow Management (ATFM) master plan, which provides more opportunities for U.S. Companies in supplying multiple ATC systems, communications and radar systems.)

  • New air traffic control center in Ho Chi Minh City
  • New air traffic control center in Danang
  • New USD 136m air traffic management facilities for Long Thanh IA- Phase 1

Maintenance, Repair, and Overhaul (MRO) Services

Vietnam MRO market is expected to grow at CAGR of 10.6 percent over the next decade 2021-2030, in line with the 9.6 percent annum expansion in its fleet. By 2030, MRO demand will total USD  7.4 billion (compared to USD 21.7 billion MRO demand of Asia Pacific)

In 2020, total local MRO revenue is USD 108 million, decrease 15 percent from 2019.  

MRO capabilities in Vietnam are currently controlled by 4 main players

  • Vietnam Airlines Engineering Company (VAECO), a subsidiary of Vietnam Airlines: Integrated MRO. In June 2019, Singapore Technologies Engineering (ST Engineering) and VAECO has established a MRO joint venture named Singapore Technologies Engineering Aerospace providing a solution for MRO components.
  • Vietstar Aero Engineering Company (VSAE), a subsidiary of Vietstar Airlines: integrated MRO
  • Southern Airport Aircraft Maintenance Services (SAMM), an affiliate of ACV: line maintenance
  • Aerospace Engineering Service JSC (AESC): component maintenance.
  • Pacific Airlines, Vietjet and Bamboo Airways: Part M maintenance.

Vietnam MRO’s capability is still in the initial stage, only accounting for up to 25 percent of market demand while 75 percent of services are being outsourced. Given the extensive infrastructure development (construction of new airports), the rapid growth rate of the aviation market in the next 10 years, and the high rate of MRO services being outsourced, the MRO market in Vietnam is certainly one of the most promising markets in the region and in the world.

CAAV encourages domestic companies to cooperate with foreign investors to enhance the country’s MRO capacity in Noi Bai, Tan Son Nhat, Da Nang, Chu Lai, Cam Ranh, Phu Quoc, and Can Tho airports. However, there are still challenges for MRO development in Vietnam due to a shortage of a skilled workforce, hangar, material distribution hub and weak supporting industry for MRO as well as a lack of preferential policy from the Vietnamese government.

Opportunities

The U.S. companies are highly respected in Vietnam as the world’s leading equipment manufacturers and service providers in the aviation sector and are known for their advanced technologies, quality, and professionalism. The U.S. companies will find significant opportunities in the following areas:

  • Architectural, engineering and construction management and consultancy services
  • Airport ground support equipment and terminal equipment: boarding bridge, baggage handling systems
  • Safety & security: airport fire-fighting and rescue, body scan, baggage screening, ground-based augmentation system (GBAS), facial recognition camera
  • IT solutions for airport operation and management:  Integrated Airport Operation, Airport Collaborative Decision Making, Airport Operation Control Center, slot management, emergency management
  • MRO
  • Training services

Challenges

  • Foreign government financing assistance is a significant challenge for U.S. firms bidding on infrastructure projects funded by other government financing assistance programs like Japanese official development assistance.
  • Many of Vietnam’s airports were former U.S. airbases, however, U.S. companies are late in returning to the market compared to EU, Japanese, and Korean competitors.
  • Project timelines often exceed initial projections. Especially with the impact of the COVID-19 epidemic, the recovery of the overall aviation industry is unpredictable which leads to slowing the process of new investment or expansion.
  • Lack of transparency in tender information and tender evaluation are also challenging for new entrants.

Resources

  • Airport Corporation of Vietnam (ACV
  • Aviation News
  • Bamboo Airways
  • Civil Aviation Administration of Vietnam (CAAV)
  • Jetstar Pacific
  • Ministry of Transport (MOT): https://moit.gov.vn/en
  • Planespotter
  • VietJet Air
  • Vietnam Air Traffic Management Corporation (VATM)
  • Vietnam Airlines
  • Vietnam Airlines Engineering Company (VAECO)
  • Vietnam Association on Aviation Science and Technology
  • Vietnam Aviation Academy (VAA):
  • Vietstar Airlines

For more information about the Vietnamese aviation industry, please contact:

Anh Nguyen, Commercial Specialist

U.S. Commercial Service – U.S. Embassy in Hanoi

E-mail: anh.nguyen@trade.gov

 

Nga Hoang, Commercial Specialist

U.S. Commercial Service – U.S. Consulate in Ho Chi Minh City

E-mail: nga.hoang@trade.gov