Aviation policy panned as not conducive to attracting foreign investment

The Vietnam Tourism Advisory Board recently urged the government to make changes to the laws to make it easier for investors to fund new airlines to increase competition and reduce fares.

Attracting foreign investors is currently a major challenge as the government considers aviation a "conditional business sector" and caps foreign ownership in airlines at 34%.

The law also requires the legal representative of an airline to be Vietnamese and allows a maximum of a third of directors to be non-Vietnamese.

This means a foreign investor eyeing a piece of the market has to partner with a domestic airline.

In the last two years Pacific Airlines, Bamboo Airways and Vietravel Airlines have all sought foreign investors but to no avail.

Luong Hoai Nam, CEO of Bamboo Airways, said other Southeast Asian countries such as Thailand, Indonesia and Cambodia allow foreign investors to own up to 49% of an airline. The cap is 40% in the Philippines.

Bamboo Airways’ recent request to the government to allow foreign investment of 49% was rejected.

Industry insiders say making profits has proven to be very difficult in Vietnam.

Nguyen Thi Phuong Thao, chairwoman of Vietjet, said at the company’s annual general meeting this year that it is very difficult to run an efficient airline.

Lai Xuan Thanh, chairman of the Airports Corporation of Vietnam, which manages 21 airports, said only six of the airports are profitable, and this has been causing investors to exit the industry.

Australian carrier Qantas sold its 30% stake in Pacific Airlines to Vietnam Airlines in 2021.

Japan’s ANA Holdings reduced its ownership in Vietnam Airlines from 8.77% to 5.62% the same year.

The Japanese firm did not buy more shares when the carrier recently issued shares to existing shareholders.

In 2020 Vingroup suspended its plans to develop Vinpearl Air, and Imex Pan Pacific Group scrapped a plan to establish a cargo airline in 2022 though it had leased some jets and even painted its logo on them.

Nguyen Quoc Ky, chairman of Vietravel Airlines, said the government should meet airline representatives to discuss how the sector could develop sustainably.