Stimulating success – VietJet Air helps to grow Vietnam market

Vietnam's low-cost carrier Vietjet Air is helping to stimulate the nation's air transport connectivity to position it as the fastest growing market across the region. With a low air travel presentation the opportunities for growth are extensive, Jay L Lingeswara, deputy director commercial, strategy and planning at VietJet Air told delegates in the first of today's Routes Talks sessions at Routes Asia.

Vietnam's low-cost carrier Vietjet Air is helping to stimulate the nation's air transport connectivity to position it as the fastest growing market across the region. With a low air travel presentation the opportunities for growth are extensive, Jay L Lingeswara, deputy director commercial, strategy and planning at VietJet Air told delegates in the first of today's Routes Talks sessions at Routes Asia. "We have a large and young population, a lengthy topography that lacks effective road and rail connectivity and a low travel penetration," he said, all conditions that are ripe for LCC growth.

The Asia Pacific market is a hot bed for predicted aviation growth over the coming two decades and Vietnam is forecasted to be right at the heart of it. Over the past ten years it has grown 18.6 per cent against an Asia Pacific average of 9.6 per cent, according to data from a World Bank study. Over the past five years this has helped raise Vietnam to the number one position as the largest outbound destination in the region and the second largest inbound market. It is expected to have the largest real GDP per capita growth of any nation across ASEAN over the next five years.

The local market dynamics are together presenting a great platform for development and Lingeswara said the Vietnamese government has been quick to identify that enhanced air transport connectivity has important economic benefits to the country. “The government has been very positive supporting airline needs to boost infrastructure,” he said.

The nation’s airport master plan will see the number of facilities rise to 20 at the end of the decade, which will handle between 62 and 106 million passengers based on conservative and ambitious forecasts, up from around 50 million passengers currently. This is expected to grow further to 132 million annual passengers by 2030.

Development works includes increasing domestic capacity at Noi Bai International Airport’s Terminal 1 to handle up to 15 million annual passengers from 2018, boosting annual capacity at Cat Bi International Airport servicing the Hai Phong area for 4-5 million passengers, opening a second terminal at Da Nang International Airport almost doubling capacity, building a second runway and terminal at Cam Ranh International Airport by 2020, boosting flows into tourism markets of Nha Trang and Phan Thiet.

At the country’s main international gateway of Tan Son Nhat International Airport in Ho Chi Minh City, a $283 million investment will increase annual capacity by a quarter from 20 million to 25 million by 2020 and up to 40 million by 2025, while the Long Thanh International Airport project, a new hub for the city is planned to be operational from 2025. This project is “in final stage” of evaluation, according to Lingeswara, and is one of four brand new airport projects being discussed as part of a $10.5 billion government investment.

“Vietnam’s air travel market has experienced strong growth, but remains unpenetrated,” said Lingeswara. “In fact it is one of the least penetrated compared to its regional peers in Southeast Asia. Rising incomes and in particular the underpenetration of low-cost carriers are further expected to maintain the growth trajectory.”

VietJet Air’s comprehensive route coverage in the domestic market means it is now well-positioned for international expansion. With nine new markets in 2016, its domestic inventory now extends to 37 markets, while its international activities have grown from two markets in 2013, to five in 2014, 12 in 2015 and to 23 last year. On the international side this could soon include the introduction of flights into Australia as VietJet Air welcomes the arrival of its first Airbus A321neo aircraft from the second half of this year. “This aircraft will give us the range to make this work,” said Lingeswara.