Vietnamese carriers fly abroad as home market begins to saturate

Budget airline Vietjet last week launched a daily service from Hanoi to Osaka in Japan, taking its total number of international destinations to 64 in 11 countries.

Last month it began flying from central Da Nang City to Bangkok. It is set to launch flights from Phu Quoc Island in the far south to the Korean capital Seoul next December and two more services to Japan in December and January.

Vietnam Airlines began a daily service from Da Nang to Osaka last month to add to the 70 flights a week from Vietnam to Japan.

The state-owned airline, which flies to 26 countries, plans to begin a direct service from Vietnam to the U.S.’s west coast in 2020, according to the Ministry of Transport.

Industry insiders said airlines are flying increasingly on international sectors because the domestic market is showing signs of saturation with growth beginning to slow down.

Vietnam Airlines data showed that the number of passengers on some of its busiest routes, Hanoi-Ho Chi Minh City and HCMC–Da Nang, only increased in the low single-digits in the first half of this year.

During the period it served 16.8 million passengers in all on domestic routes, 3.6 percent short of its target.

Lai Xuan Thanh, chairman of the Airports Corporation of Vietnam (ACV), said these are signs of saturation in the market, which for years has been growing in double digits.

The rates were 20 percent in 2014, 27 percent in 2015 and 30 percent in 2016, with Thanh attributing the high growth to private carriers beginning to fly on many new routes, according to Tuoi Tre newspaper.

He said the market would continue to slow down this year.

Higher profit

But growth remains strong on international sectors.

Vietnam Airlines carried 14.8 million passengers in the first half, up 23 percent year-on-year and 1.6 percentage points higher than forecast.

Vietjet Air’s third quarter financial reports showed that international services accounted for over 50 percent of revenues.

Its CEO, Nguyen Thi Phuong Thao, had said at a conference last May that profits from international services, especially to Northeast Asian destinations like Taiwan and South Korea, are 20 percent higher than from domestic ones.

Fuel cost is 30 percent lower in other countries since there is no import tax or environmental tax unlike in Vietnam, she explained.

Thus, 16 of 20 new routes Vietjet plans to start this year are international. Last year it had added only one new domestic route.

The new international routes are also expected to benefit Vietnam’s growing tourism sector.

Le Pham Huy Truong, director of the aviation service department at tourism company Fiditour, said new international flights, especially direct ones, provide passengers with more travel options and enable them to save time and money.

Other tourism operators also said the new flights make them less dependent on expensive foreign airlines.

There are over 100 international flights now connecting Vietnam with 28 countries, operated by 71 international airlines and three Vietnamese ones, according to the Ministry of Transport.

Vienam’s five airlines are Vietnam Airlines, Vietjet, Jetstar Pacific Airlines, Vietnam Air Services Co., and recently-licensed Bamboo Airways, which plans to start flying within weeks.