According to data from the Vietnam National Administration of Tourism (VNAT), the number of international tourists visiting the country grew from 4.25 million in 2008 to 15.5 million in 2018, while the number of domestic tourists rose from 20 million in 2009 to 80 million this year. In the last ten years, total revenue from tourism has climbed more than ten times from 60 trillion VND (2.59 billion USD) in 2008 to 620 trillion VND (26.7 billion USD) in 2018, accounting for 7.8 percent of the country's GDP.
Vietnam's aviation market had developed strongly during that time, with average revenue growth of 17.4 percent, two times higher than the 7.9 percent average in Asia, according to the International Air Transport Association (IATA).
Data from the Civil Aviation Authority of Vietnam show that Vietnamese airlines transported 50 million passengers last year, five times higher than in 2008. By December 2018, Vietnam's aviation market had 68 foreign airlines from 25 countries and territories, along with five domestic airlines.
Over the past decade, the number of aircraft has from 60 aircraft to 192 aircraft. The flight network has been expanded about three times with 60 domestic and 130 international routes currently operating. Together with major airports - Tan Son Nhat, Noi Bai and Da Nang, other airports such as Van Don, Cat Bi, Can Tho, Lien Khuong and Phu Quoc have contributed to the development.
In the latest report, IATA also ranked Vietnam the fifth fastest growing aviation market in the world and the fastest in Southeast Asia, and forecast average growth of nearly 14 percent in the next five years, reaching 150 million passengers by 2035.
Potential is still huge
Given the geographical area and a population of 100 million, there is still room for the local aviation to grow. Currently, Vietnam has five airlines but only Vietnam Airlines, Jetstar Pacific, Vietjet Air and newcomer Bamboo Airways have been commercially exploited. Vietstar Airline only operates light aircraft.
Compared to the current 13 regular airlines and nearly 10 charter companies operating in Thailand, there is still a lot of room to grow. The number of airlines operating in Vietnam is much smaller than Singapore, Malaysia, the Philippines, Cambodia and Myanmar, and five times less than Indonesia.
In a letter to the Prime Minister in mid-2018, TAB said that despite having only 72 percent of Vietnam's population, Thailand had four times more airlines and three times more international tourists. According to the Vietnam Tourism Advisory Board (TAB), together with low tour prices, the variety of aviation services was a pull for Thailand.
TAB said that by expanding the local aviation industry, Vietnam could compete and use its advantages.
Seeing the potential of the market, Malaysia and Thailand Air Asia submitted proposals to establish a low-cost airline in Vietnam. Not commenting on whether it would continue to apply after four unsuccessful attempts over years, a representative of Air Asia told Vietnam News: “We will continue to expand our network to connect Vietnam with ASEAN and beyond.”
The airline is now running 17 routes connecting Vietnam with international routes. AirAsia sees heavyweight competitors from local airlines in Vietnam which are rapidly expanding their networks into international markets. However, the airline representative told Vietnam News: “The competition offers more benefits to travellers as they have more choices.”
The most recently approved airline, Kites Air, is being developed by famous tourism firm Thien Minh Group. Knowing the market, Kites has set its bases in Chu Lai and Da Nang, saying it would focus on connecting small and medium airports, especially those with limited infrastructure.
With tested tourism products as well as the largest online travel agency in the domestic tourism market, iVivu, Kites is expected to help connect Thien Minh Group's products.
Kites plans to launch flights in the summer next year to serve domestic routes to the central and southern regions of Vietnam, then expand the network to Indochina, Southeast Asia and then Northeast Asia.
Similar to Kites, one of the leading travel firms in Vietnam Vietravel also plans to launch its own airline in Q1, 2020.
Vu Duc Bien, General Director of Vietravel Airlines, said the airline would mostly operate as a charter airline to serve Vietravel's customers as well as other passengers.
Vietravel recognised the opportunity in the charter market in Vietnam when 51,000 charter flights were recorded in 2017. Since 2015, Vietravel has been working with local airlines to provide about 300-400 flights each year, which was far below the demand.
A Vietravel representative said: “There is more room in the market.”
In April, Vingroup established Vinpearl Air with registered capital of 1.3 trillion VND and plans to buy 30 aircraft to operate on international routes.