2019: The year Vietnam’s aviation sector sprouted new wings

Vietnamese skies espied a new logo and color in January as Bamboo Airways launched its first flights, looking for a share of a market traditionally dominated by the blue and red of Vietnam Airlines and Vietjet.

Within the year, the rookie had operated 14,378 flights (January-October), launched an international route to South Korea, and received its first wide-body Boeing 787-9 Dreamliner as part of a fleet that is set to expand to 30 jets.

The airline is eyeing non-stop flights to the U.S., something that even the national flag carrier, Vietnam Airlines, has not achieved to date; and has also packed its fleet with narrow-body aircraft to compete with budget carrier Vietjet.

Until the entry of Bamboo Airways, Vietnam’s aviation industry was dominated by two carriers - Vietnam Airlines in the high-end market and Vietjet in the budget territory. 

Meanwhile private conglomerate Vingroup in August applied for a commercial airline license with an investment of VND4.7 trillion ($202 million). It wants to start flying July 2020. 

Hospitality firm Thien Minh Group in August also applied for licenses to be the next carrier, planning to launch its KiteAir in June next year with short-haul ATR-72 aircraft.

Tourism firm Vietravel Airlines in September raised VND700 billion ($30 million) through bonds to launch its maiden flight next year using either the narrow-body Airbus A321neo or Boeing 737.

The budding market entrants are looking to cash in on surging air travel demand in a fast growing economy. In 2012, 37 million passengers passed through Vietnam's airports, but this is set to triple to 112 million this year, according to the Airports Corporation of Vietnam.

Reports have said that Vietnam is set to have the highest air passenger number compound annual growth rate in Southeast Asia in 2016-2021 at 17.4 percent, compared to the 6.1 percent average in ASEAN.

Aviation officials say that the number of air passengers in a developed aviation market should be 1.5 times its population, and even double, as in the U.S. and South Korea. As this figure is 0.74 in Vietnam, the market is deemed to have plenty of room for growth.

Existing carriers have been posting strong business results. Vietjet last year saw its revenue rise 24 percent from 2017 to VND52 trillion ($2.24 billion), while that of Vietnam Airlines climbed 17 percent to VND96.8 trillion ($4.18 billion).

Jetstar Pacific also recorded its first after-tax profit last year at VND34.26 billion ($1.57 million).

Management issues

However, the addition of more carriers has also raised concerns about how existing airports, already stretched to beyond their capacity, can manage more flights. 

"New airlines mean more aircraft, while infrastructure is already overloaded. Authorities will face difficulties in managing new aircraft and ensuring their safety," said aviation expert Nguyen Thien Tong.

The biggest airport in the country, the Tan Son Nhat International Airport in Ho Chi Minh City, served 38 million passengers last year against a designed capacity of 28 million, while the Noi Bai International Airport in Hanoi needs to repair two of its runways after they have been overused for some time.

Aging airport infrastructure has limited authorities from licensing new carriers. Vietstar Airlines got its air operator certificate this year, two years after it was first rejected because of the high after being rejected in 2017 due to high traffic at the Tan Son Nhat Airport. 

Bamboo Airways has chosen to headquarter itself at the Phu Bai International Airport in Thue Thien-Hue Province, where the traffic is less. 

The shortage of human resources is another concern. While major airlines are focused on expanding their fleet, the CAAV has been struggling to hire aviation safety officers to manage more aircraft. 

The country now has 256 aircraft, but this figure is estimated to reach 450 in 2025, with Vietnam Airlines, Vietjet and Bamboo Airways all having placed orders for new jets.

For every 10 new aircraft, CAAV needs two more flight safety officers, who are required to be former pilots. However, current regulations allow it to recruit only one for every two retired officers, said CAAV deputy head Vo Huy Cuong.

More difficulties arise from the fact that pilots tend to remain at local airlines for higher pay rather than work for the government, he added.

At least seven more flight safety officers are needed next year, and 37 more by 2025, to handle the surging fleet, he said.

Pilot shortages also pose a big challenge. In June, many Vietjet flights were delayed by up to seven hours as the airline had to withdraw some overworked pilots from flights to comply with safety regulations.

Vietnam Airlines, the country's flag carrier, is struggling to hire 193 now pilots. In May, the state-owned carrier filed a complaint with the Ministry of Transport about losing its pilots to Bamboo Airways.

Vietnam Airlines has been limiting operations of the wide-bodied Boeing 787 due to a lack of experienced pilots amidst a global shortfall, said the carrier's deputy general director Le Hong Ha.

Despite the problems, officials see space for more carriers. Dinh Viet Thang, head of CAAV, said that Vietnam could still increase the number of commercial airlines from five to eight.

The current number is still low compared to Thailand at 16 carriers, Indonesia at 12, Philippines at 10 and Singapore at 6, he said at a recent forum.

Local airports served 103.5 million passengers last year, and Thang said this figure could reach 150-180 million by 2025.