Vietnam Airlines: big ambitions [-VN Airlines own half of Cambodia Angkor Air]

January 17, 2011
By Ben Bland
Financial Times (UK)

State-owned Vietnam Airlines wants to turn Hanoi and Ho Chi Minh City into “major gateways” for the wider Indochina region, challenging the dominance of Bangkok and Singapore.

In an interview with the Financial Times, Pham Ngoc Minh, the flag carrier’s chief executive, said he was looking to expand connections with Cambodia, Laos and Myanmar, as well as adding new routes and more flights to Europe.

Minh said:

We have our strength in our domestic market but, at the same time, we hope that as we develop Hanoi and Ho Chi Minh City, they become major gateways for the sub region.

Vietnam Airlines already has a 45 per cent market share at Cambodia’s Siem Reap airport, which is the dropping-off point for the ancient temples around Angkor Wat.

Minh is aiming to ensure that Vietnam Airlines becomes the network carrier of choice for the growing number of tourists visiting Cambodia and Laos. The launch of more direct flights to China, Japan, Europe and the United States is a necessary first step.

Direct long-haul connections to Vietnam are still patchy, with no flights to London yet, for example.

Minh said it was a “priority” to launch flights to London this year. Vietnam Airlines is looking at both Heathrow and Gatwick airports, but the “big question mark” over the more centrally located Heathrow airport is the availability of slots.

We can’t start up with two flights a week – if you start with this frequency in London, you can’t survive. I think we will start with around four flights a week, at least, as it’s convenient for both business and leisure travellers.

It’s very difficult to get slots in Heathrow, as we expected. But we will try our best to have a London flight hopefully by the end of this year.

Business links between Vietnam and the UK are growing, albeit from a comparatively low base. Apart from China, Vietnam regularly comes top of surveys of the most attractive investment destinations for British companies, such as this one by the UK’s trade promotion body.

A growing number of wealthy and well-connected Vietnamese are also sending their children to be educated in the UK, including many scions of the ruling Communist elite.

Yet, in terms of trade relations, the UK is still behind the likes of Japan, which has been cultivating closer economic ties with Vietnam as part of a government drive to boost exports.

One example of this approach is the Japanese government-backed Mitsubishi Regional Jet, which Minh said could potentially fill a gap in the market for 100-seat, high frequency, short-haul planes.

Vietnam’s president, Nguyen Minh Triet, has already stated that Vietnam is considering buying the new jet as part of a wider agreement that would see Mitsubishi shift some of its manufacturing and technology to Vietnam. No further details about a deal have been reported.

Minh confirmed that Vietnam Airlines was looking at the Mitsubishi Regional jet but he stressed that there are “a lot of other manufacturers in this area”, which include Canada’s Bombardier and Brazil’s Embraer.

Although Vietnam Airlines enjoys a monopoly position, Minh is keen for the government to free up the market and relax the existing ceiling on domestic fares in order to promote the wider development of the air travel sector.

Gradually a roadmap to free up control of fares in domestic market would attract more investors. I would hope the day comes when the Vietnamese community will see their chance to invest in the airline business.

But monopoly state control over Vietnam’s airports and airport services such as refueling will make life difficult for private operators, especially in an industry where profit margins are so tight.

While visiting Vietnam, Giovanni Bisignani, director general of the International Air Transport Association, the main industry body, warned on Friday that Vietnam cannot take its bright future for granted. He said:

Vietnamese aviation must be built and supported by sound policies that take into account that this is a dynamic industry where change is the only constant.