Vietnam

Emirates' Ho Chi Minh service to impact Asian carriers, but provides Vietnam with much needed growth

Vietnam’s international market will get a long overdue shake-up later this year as Emirates finally launches services to Vietnam. Emirates’ decision to launch Dubai-Ho Chi Minh City service from Jun-2012 hardly comes as a surprise as Vietnam was the only major Asian country missing from the carrier’s fast-expanding route network. The rapid growth of Vietnam’s tourism and business sector combined with the current relative lack of long-haul capacity compared to other major ASEAN countries makes the Vietnamese market particularly appealing to Emirates.

Emirates will initially operate a daily flight between Dubai and Ho Chi Minh using 278-seat two-class A330-200s, resulting in 3892 weekly seats to and from Vietnam. This will immediately make Emirates the third largest carrier from outside Asia serving Vietnam. As a result, Emirates is poised to become one of the leading carriers in the Vietnam-Europe market, which is growing rapidly as Vietnam emerges as a major tourist destination.

US carriers shrinking in United States-Southeast Asia market

US carriers are shrinking their presence in the Southeast Asian market, which they serve via Asian hubs, typically in Tokyo or Hong Kong. United's current schedule sees a 27% drop from its last schedule, and is made feasible by merger partner Continental having a narrowbody fleet in the Asia-Pacific region. The decline follows previous cuts made by Delta merger partner Northwest. Despite United's cuts to Vietnam, Delta has no plans to add capacity. Southeast Asian carriers have almost twice the capacity to North America as US carriers have to Southeast Asia.

Delta even considered deploying its B777-200LR on non-stop flights from the US to Singapore, as Singapore Airlines does with a fleet of A340-500s, but determined sustaining the flights would be difficult. Working against US carriers are their higher cost bases than Southeast Asian carriers, despite US carriers having extensive fifth freedom rights in the region.

Outlook of Jetstar Pacific uncertain with possible Vietnam Airlines stake

The future of Jetstar Pacific, the Vietnamese low-cost subsidiary of the Qantas Group, is uncertain following various reports state-owned Vietnam Airlines may takeover the 70% local shareholding from other state-owned companies, Saigontourist and the State Capital Investment Corporation. Vietnam Airlines already has dealings with the Qantas Group by way of a codeshare on flights between Australia and Vietnam.

While the transfer, if it proceeds in the medium- or long-term, may appear to be a paperwork exercise, it could change Vietnam's emerging low-cost carrier market, which at 18.6% has one of the lowest domestic penetration rates in Asia and the world. It is an evolving story we have been following, and one that shifted when Vietnam Airlines announced its intention to launch its own LCC unit by 2014, as we reported last month.

VietJet launch not affected by AirAsia pullout

AirAsia’s decision last week to not go forward with its Vietnamese joint venture is a major setback for the AirAsia Group and Vietnam’s promising aviation market. But by no means does it spell an end or even a delay for AirAsia’s Vietnamese partner, VietJet Air, which is moving forward with plans to launch services in Dec-2011 without AirAsia.

Vietnam’s LCC market poised for explosive growth as VietJet AirAsia launches and Jetstar expands

The Vietnamese aviation market is poised for significant low-cost carrier growth as a new AirAsia affiliate launches services at the end of this year and the country’s first LCC, Jetstar Pacific, plans to finally implement long-delayed expansion plans. Meanwhile flag carrier Vietnam Airlines is preparing to launch its own LCC subsidiary or unit by 2014. Three LCCs may seem like too many for a market which last year consisted of only about 20 million passengers, but is reasonable when considering the rapid economic growth in the country and the small size of its LCC sector compared to other ASEAN countries.