This is a best prospect industry sector for this country. Includes a market overview and trade data.
Since ending COVID-19 travel restrictions, Vietnam now leads the world’s fastest-recovering domestic aviation sector and is the world’s 5th fastest-growing aviation market, expected to reach 150 million air transport passengers by 2035, according to the International Air Transport Association (IATA). During the first six months of 2022, Vietnam’s airports served 40.7 million passengers, and 765,000 tons of cargo, up 56.8 percent and 30.6 percent over the same period last year, respectively, according to the Civil Aviation Administration of Vietnam (CAAV), the agency under the Ministry of Transport (MOT) that regulates the aviation industry. The CAAV forecasts airports nationwide will serve approximately 87.8 million passengers and 1.5 million tons of cargo in 2022, up 190 percent and 5 percent compared to 2021, respectively.
This strong growth comes from the Government’s strategic decision to reopen international commercial routes from February 15 to restore trade and reopen tourism from March 15, the breakthroughs of the domestic market, and the continued good performance of freight transport.
From 2021 to 2030, CAAV estimates the average annual growth rate will reach 7.5-8.5 percent for passengers and 8.4 - 9.7 percent for freight traffic. By 2030, passenger throughput is forecasted to reach 278 million and freight throughput is at 4.1 million.
Vietnam is making significant investments in airport construction and upgrades, air traffic service enhancements, aircraft maintenance, overhaul capacity, and freight transport development, which all present opportunities for U.S. companies.
In 2021, Vietnam imported approximately $61.8 million U.S. Aerospace products from The U.S.
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 226 aircraft. According to the 2021 Commercial Aviation Fleet & MRO forecast, Vietnam’s fleet will reach 521 aircraft by 2030 at a CAGR of 9.6 percent (compared to 3.4 percent of Asia Pacific). In the first six months of 2022, Vietnamese airlines’ passenger traffic reached 20.1 million near the pre-pandemic level, up 56.1% compared to the same period of 2021, and has been growing faster than capacity. Despite the positive growth of the aviation industry and the strong recovery in revenue, there are still challenges for local airlines.
Vietnam Airlines: is the national flag carrier, occupying 40% domestic market share. The carrier currently operates 95 aircraft with an average age of 7.8 years and plans to expand to 166-186 aircraft by 2030. In the first half of 2022, Vietnam Airlines transported 9.36 million passengers. Despite the strong recovery in revenue, the carrier suffered losses of approximately USD 228 million. According to its report, the airline is seeking financial aid from the Government, and loan payment extensions from lenders (commercial banks, lessors, and suppliers…). Besides that, Vietnam Airlines also finds other solutions like aircraft/ engines liquidation or divesting 35% stake in Cambodia Angkor Air, delivery extension of 5 aircraft typed B787-10 and A320 Neo by end of 2022 or early 2023, and cancellation of 4 aircraft typed B787-10 and A320. The freight transport business has witnessed good performance with a revenue increase of 80% compared to the same period in 2021.
VietJet: A privately owned low-cost carrier (LCC) with a 34% domestic market share. VietJet operates 77 aircraft with an average age of 6.2 years. In the first half of 2022, the carrier transported approximately 9 million passengers, up 200% compared to the same period in 2021, and 11,000 tons of cargo, making an after-tax profit of USD 3.26 million (VND 76 billion), up 123% compared to the same period in 2021 thanks to its cost management ability, the expansion of the international network to India, digitalization adoption and the good performance of freight transport. VietJet has been named the “Value Airline of the Year” and the “top 10 best low-cost airlines” for 2022 by Airline Ratings. On July 2022, VietJet and Boeing reached an agreement to reaffirm the previously announced order for 200 737 MAX aircraft during the 2022 Farnborough International Airshow in the UK. The order is worth around $35 billion, including associated engine engineering services.
Pacific Airlines: is a low-cost subsidiary of Vietnam Airlines, holding about 98% of shares after taking over from Quantas Asia Investment Company. The carrier has got heavy losses in 2020 and 2021 and is currently deeply negative in charter capital. Vietnam Airlines is calling for investors to restructure the airlines; however, the process encountered many difficulties in terms of mechanisms and policies. The fleet currently consists of sixteen A320-200, with an average fleet age of 8.8 years and with 4% domestic market share.
Vietnam Air Services Company (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 5 ATR72 aircraft, with average fleet age of 13 years and with a 3% domestic market share.
Bamboo Airways: is a hybrid carrier with an 18% domestic market share previously owned by Vietnamese property developer FLC Group. In August 2022, the carrier was acquired by a new investor and is under a restructuring process to keep its growth. Bamboo Airways currently operates 30 aircraft with an average age of 7.9 years and plans to increase its fleet to 35 by the end of 2022, 42 in 2023, and 100 in 2028 with a focus on developing long-haul nonstop international flights. In the first half of 2022, Bamboo Airways recorded a loss of about USD 41 million (VND 954 billion). Bamboo Airways was honored as Most Improved Airline in Asia 2022, Best Cabin Crew in Asia 2022, and Asia’s leading regional airline.
Vietravel 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 3 Airbus A321S with an average age of 6.2 years and plans to increase its fleet to 6 by the end of 2022. The airline resumed operation in December 2021 and expanded its route networks up to 40% in the first half of 2022, compared to the same period of 2021, however, it still recorded a loss of about USD 11 million (VND 267 billion) due to the fuel price spike.
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 was 91 million passengers annually, while the volume of passengers through airports in 2019 was 116 million, which caused great pressure on management, safety issues, and flight delays in key airport hubs like Tan Son Nhat (HCMC) and Noi Bai (Hanoi).
Under the new draft national airport network development plan for the 2021-2030 period, with a vision until 2050, in Sep 2022, The Ministry of Transport (MOT) proposed that by 2030, Vietnam will develop 28 airports that are capable of welcoming about 278 million passengers and 4.1 tons of cargoes annually. To implement, Vietnam will need about $17.6 billion to build six new airports, including Long Thanh (Dong Nai-under construction), Sa Pa (Lao Cai), Na San (Son La), Quang Tri, Lai Chau, Phan Thiet (Binh Thuan) and upgrade two main hubs - Noi Bai International Airport (Hanoi) and Tan Son Nhat International Airport (Ho Chi Minh). After 2030, the second airport for Hanoi will be studied.
Anticipated airport infrastructure investments and expansions in the period between 2021-2030 are as follows:
- New construction at USD 5.46 billion- 25mpa Long Thanh International Airport- Phase 1 (2021-2025): under construction and tendering.
- New USD 472mn- 20mpa T3 Terminal at Tan Son Nhat International Airport (2022-2025): planned for construction in early 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.
- New construction of Phan Thiet, Sa Pa, Quang Tri, Lai Chau airports: under investors selection for construction by 2023.
Legal provisions in investment and funding are key obstacles to aviation infrastructure projects. Under the draft master plan, it proposed the decentralization to localities and the maximization of Public-private partnership investment, in which the people’s committees of cities and provinces with new airport planning will have the authority to mobilize and balance resources and organize investment implementation. The public-private partnership investment is a breakthrough solution to reduce pressure on the state budget and increase the 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. ACV and many private investors like Imex Pan Pacific Group, Vietjet Air, T&T Group, or Sun Group are in line waiting for government approval to invest in Vietnam airport infrastructure projects.
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.
In2021, VATM provided air navigation services for 293,426 flight movements, declining 30% compared to 2020 and accounting for only 30% of flight movements in pre-pandemic period. ,. VATM’s total revenue has also underwent drastic decrease of 17.2% to approximately $62 million compared to 2020. By 2030, VATM aims to provide air navigation services to 2.5 million flights (without COVID-19 scenario).
Major projects and investments by VATM to modernize its facilities Are:
- 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.)
- VATM and I.M.S.G is about to start on a project to to establish the Numerical Weather Prediction Model via the operation of the eIAWS® (Enterprise Integrated Aviation Weather System) trial version. The project is funded by USTDA, aiming to improve the aviation weather forecasting capabilities for the ATM
- 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.
In 2022, total local MRO revenue is estimated to reach $151 million while the total MRO demand in Vietnam is $654 million.
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 23 percent of market demand while 77 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. In July 2022, Vietnam Ministry of Transport has approved an investment of more than $118 million to develop four MRO facilities at Long Thang International Airport. The facility will meet requirements of European and American standards, providing service to licensed planes such as Boeing B777/B787, Airbus A330/A350, narrow-body A320/A321 and Boeing 737.
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.
It would be beneficial for big airlines and MRO service provider to try the technology such as Big Data, Blockchain, IOT, Robotic Process Automation to catch up the technology trend and to become a pioneer in the aviation industry for others to follow.
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: including Big Data, Blockchain, IOT, Robotic Process Automation solution
- Training services
- 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.
- Lack of transparency in tender information and tender evaluation are also challenging for new entrants.
- Airport Corporation of Vietnam (ACV)
- Aviation News:
- Bamboo Airways
- Civil Aviation Administration of Vietnam (CAAV): www.caa.gov.vn
- Pacific Airlines
- Ministry of Transport (MOT)
- VietJet Air
- Vietnam Air Traffic Management Corporation (VATM)
- Vietnam Airlines
- Vietnam Airlines Engineering Company (VAECO): www.vaeco.com.vn
- Vietnam Association on Aviation Science and Technology (VAAST)
- Vietnam Aviation Academy (VAA)
- Vietravel Airlines
For more information about the Vietnamese aviation industry, please contact:
Anh Nguyen, Commercial Specialist
U.S. Commercial Service – U.S. Embassy in Hanoi
Nga Hoang, Commercial Specialist
U.S. Commercial Service – U.S. Consulate in Ho Chi Minh City