Vietnam has banned any new Vietnamese startup airlines until at least 2022 as airlines worldwide try to recover from the devastating coronavirus pandemic. According to Viet Nam News, Deputy Prime Minister Trinh Dình Dung made the announcement earlier today.
The Deputy Prime Minister said that there would be no new airlines in Vietnam until the aviation industry has fully recovered from the coronavirus crisis. This ruling now confirms what the Ministry of Transport (MOT) proposed back in May.
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This is bad news for new startups
This latest news will come as a shock to many Vietnamese startups that were looking to take to the skies in the coming months. Vietstar Airlines of Vietstar Airlines Multirole Corporation and Kite Air of hospitality group Thien Minh were both heavily engaged in getting their new airlines off the ground. Now the pair will no longer have to compete against each other for a license but wait until the government once again decides to award permits.
When speaking about the decision to the Viet Nam News Minister of Transport, Nguyen Van The said,
“In the most optimistic scenario, only in 2022, the local aviation market could reach the result it did in 2019.”
According to the MOT, the Southeast Asian nation has 214 aircraft, of which only half are being used due to COVID-19. To combat this and ensure a sustainable aviation industry, the MOT wants to restore domestic air transport before looking to the future.
Vietnam has five commercial airlines
The Deputy PM has assigned the MOT to take responsibility in ensuring the sustainable development of the aviation industry.
As of today, Vietnam has five commercial airlines which include, Vietnam Airlines, VietJet, Jetstar Pacific Airlines, Bamboo Airways, and Vietnam Air Services (VASCO).
Before the COVID-19 outbreak Vietravel Airlines, owned by the nation’s largest travel agent, was granted a license but is still awaiting a flight permit. Of the five airlines, two of them dominate the marketplace, and with Qantas getting rid of its 30% stake in Jetstar Pacific, the worry is that ticket prices will increase.
Currently, national flag carrier Vietnam Airlines and budget airline VietJet command 75% of the market, and it will remain this way unless new airlines are given permits. Before the coronavirus hit, the new airline on the block, Bamboo Airways, made all the headlines with its new aircraft and its desire to become Vietnam’s first 5-star airline. It may now feel as though all the hard work it put in may have been for nothing and that now it has to start again from scratch.
As far as foreign entities entering the marketplace, it is almost a non-starter with any investment capped at 34%. Southeast Asia’s largest low-cost airline AirAsia has tried four times to enter the Vietnamese market without success, solidifying that Vietnam does not want non-Vietnamese LLCs.
To give you an idea as to the potential Vietnam holds, the route between Hanoi and Ho Chi Minh City (Saigon) is the fourth busiest domestic corridor in the world per available seats.
Air travel in Vietnam was growing at 20%
The Vietnamese air travel market was growing at a steady 20% for the past five years and looked poised to continue that growth as more people took to the air. Vietnam says that it now has the coronavirus under control and that domestic flights are currently operating at pre-coronavirus levels.
If Vietnam can continue to keep COVID-19 at bay, its aviation industry may recover quicker than many others.
What do you think about Vietnam not allowing any new airlines until 2022? Please let us know your thoughts in the comments.