New cargo airline to advance Vietnam logistics

"Vietnam needs a cargo airline to boost the transport of goods domestically and internationally. It will bring about many economic benefits," said aviation expert Nguyen Thien Thong.

He was commenting on a proposal by retail company Imex Pan Pacific Group (IPPG) to establish a cargo airline by next year, the first fully-fledged such company in Vietnam.

With an initial investment of VND2.4 trillion ($103.6 million), IPP Air Cargo will start with five freighters. It estimates revenues of $71 million in the first year of operation.

It would be the only cargo-dedicated airline in Vietnam, where all six carriers prioritize passenger transport.

Vietnam ranks eighth among the top 10 emerging logistics markets globally, but 80 percent of the market is in the hands of foreign companies, according to the Vietnam Logistics Association.

Logistics costs in Vietnam account for over 20 percent of its GDP, while the global average is 11 percent.

This shows that there is a need for domestic companies to step up and take over the industry from foreign companies and reduce costs, experts say.

Former Prime Minister Nguyen Xuan Phuc had in September last year ordered the Ministry of Transport to research the possibility of establishing a cargo airline to help distribute agriculture and electronic goods.

In 2008, Trai Thien Air Cargo had received a permit for domestic and international transport, but it was not active for three years and the permit was canceled in 2011.

IPP Air Cargo seeks to be the cargo airline the country needs. IPPG chairman Johnathan Hanh Nguyen said that the company will focus exclusively on cargo and not branch into passenger transport, avoiding competition with other airlines.

Nguyen, a professional with experience in logistics and aviation, said he targets claiming 38 percent of Vietnam’s logistics market.

The company will negotiate with foreign airlines to establish linked routes to 16 airports in Vietnam which will help transport goods directly from localities of origin instead of through big airports, he said.

He also told the Thanh Nien newspaper that he had been developing a logistics network over the past year to prepare for the airline.

However, his airline will not be the only cargo carrier in the sky. Vietnam Airlines has long been eyeing the establishment of its own cargo fleet, and during the pandemic, it removed seats from 12 wide-bodied aircraft and converted them into cargo carriers.

Both Bamboo Airways and Vietjet have also mentioned plans to develop their own cargo fleet, but neither has made any concrete move towards this.

Tong said that there could be competition in the industry, but eventually, it will benefit the development of e-commerce when a network of air cargo transport is established.

"Coffee from the central highlands, lychee from the northern province of Bac Giang and seafood from the Mekong Delta region can be transported within a day to any locality if cargo air routes existed," he said.

Having a cargo airline is a necessity as most countries have at least one, and the recent boom in e-commerce means there is high demand for such transportation. This is the right time, therefore, for Vietnam to establish its own cargo airline, he added.