Market boom spurs Vietnamese airline carriers to expand fleets at speed

By VnExpress December 6, 2016 | 11:38 pm PT

An aircraft of Vietnam Airlines prepares for landing at Noi Bai airport in Hanoi, Vietnam on November 2, 2016. Photo by Reuters

But the country's airports do not have the capacity to cope with soaring passenger numbers.

Vietnam’s aviation market is growing at the third-fastest pace in the Asia-Pacific region, but the country is grappling with an acute dearth of airport capacity.

It is estimated that the number of passengers in 2016 will jump by 29 percent from a year ago to about 52.2 million, according to the Civil Aviation Administration of Vietnam.

Aviation authorities also estimate that the number of passengers on domestic flights will soar 35 percent to 28 million this year from 20.7 million last year, accounting for more than half of the total.

Low-cost carriers have become the key driver for Vietnam’s fast-growing airline market, transporting 55 percent of domestic passengers in 2016.

Budget airlines are rapidly increasing their market shares with an annual growth rate of 15-20 percent, said aviation authorities. VietJet Air, the dominant player in the low-cost market, has quickly captured a 40 percent share of Vietnam’s local market, and will likely surpass state-owned Vietnam Airlines in the next few years as Vietnam’s largest domestic carrier.

To meet the local market demand, airline carriers have maintained a rapid rate expansion over the past five years, raising the total number of aircraft by 50 percent to 141 by the end of the third quarter of 2016.

National flagship carrier Vietnam Airlines, low cost carriers Jetstar Pacific and VietJet Air and newly-founded Vietstar are all planning to expand their fleets to a combined 263 aircraft in the next four years.

The ambitious expansion plan reflects a targeted annual capacity of 102 million passengers by 2020; around double the current capacity.

However, given that the country’s two major airports are overloaded, airlines might have to put the brakes on their expansion plans.

For instance, Tan Son Nhat Airport in Ho Chi Minh is expected to handle 31 million passengers this year, far beyond its maximum capacity of 25 million.

Meanwhile, the construction of Long Thanh Airport about 40 kilometers from Ho Chi Minh City, which will take up the overflow from Tan Son Nhat, may not be completed before 2025. By then aviation officials say Tan Son Nhat is forecast to receive a whopping 50 million passengers a year.

The situation is likely to worsen in the next four year as domestic carriers plan to expand their fleets to capitalize on the market potential, Lai Xuan Thanh, the director of the Civil Aviation Administration of Vietnam, told the government’s online news portal.

Aviation authorities are considering putting a cap on the number of new planes local airliners can buy in the next four years due to the serious lack of airport capacity.

Under the development blueprint for Vietnam’s airline market over the next four years, market regulators have put forward a plan under which the four domestic airlines will be allowed to add no more than 89 aircraft to the total 141 they currently operate.

>Vietnam to upgrade overstretched airport in Ho Chi Minh City