Covid-19 Puts Vietnamese Airlines on Back Foot

When VietJet Air president and CEO Nguyen Thi Phuong Thao announced an order for 30 Airbus A321s worth $3.6 billion at Dubai Airshow 2015, her presence proved to be one of the event’s highlights, as a dearth of orders only served to underline the extent of the questions that underpinned the blockbuster outings posted by UAE-based airlines at the show two years earlier.

according to Forbes magazine, she became Vietnam’s first self-made woman billionaire when she took the budget airline public in February 2017. In January, Perth, Western Australia-based once again ranked VietJet among the Top 10 safest low-cost airlines, this time for 2022, out of 385 global airlines.

“The airline is extremely clever in its marketing but behind that fun is a very smart and serious business plan that brings affordable travel to millions,” said AirlineRatings editor-in-chief Geoffrey Thomas.

Stretching north to south just under 1,650 kilometers (1,020 miles) at its longest expanse, Vietnam has won plaudits for the tourism welcome it extends, although Cambodia has tried to compete with a budget offering that some travelers have found hard to resist. The International Air Transport Association lists as member three Vietnamese airlines—Vietnam Airlines, VietJet, and Bamboo Airways.

Founded in 1956, Vietnam Airlines ranks as the country’s biggest airline, with over 100 Airbus and Boeing aircraft, including about 30 widebodies. It launched post-Covid flights to London and Paris in late January.

“Vietnam is way more developed than Cambodia and Laos,” Mayur Patel, OAG head of Asia told AIN† “In Vietnam, it’s quite a long stretch from north to south. Aviation plays an important role in moving people and that’s where the success has come, through VietJet. Of course, you had Vietnam Airlines for a very long time; VietJet came in and disrupted the aviation landscape.”

Launched in 2017, Bamboo served as a vehicle to link Vietnamese leisure destinations to international markets. Owned by construction conglomerate FLC Group, its fleet consists of 29 aircraft, including three Boeing 787-9 aircraft, and 20 A320-family aircraft.

Patel said the airline’s purpose centered on drawing tourists to Vietnam. “International long haul…[Boeing] 787sa…a new fleet…the parent company owns or is developing resorts; the whole idea was to bring tourists in and move people through their airline and hotels,” he explained. “Vietnam tends to be much more progressive and ahead of the curve than Cambodia or Laos.”

Boeing managing director for marketing David Schulte said the Covid-19 state of play remained an onerous factor for airlines based in the Asia-Pacific region.

“It’s for sure the middle of it,” he said. “In terms of the crisis, many of these airlines are in survival mode and will be coming out of the crisis well positioned and very strong. Vietnam is a particularly interesting market, and the only Southeast Asia player with positive GDP growth rates, and one of very few across the globe. Vietnam is very well-positioned to be a very strong market moving forward. Thailand will be interesting to follow as well, with a massive associated tourist industry. They’ll be well positioned.”

With a fleet of 75 mostly narrowbody aircraft, VietJet claimed in November to have deferred elements of an order with Airbus for 119 A321neos. Siva Subramaniam, partner and specialist in aviation financing for Singapore-based law firm Herbert Smith Freehills, said VietJet faced serious Covid-19-associated problems. “At one stage, VietJet was looking at insolvency, and Vietnam Airlines was also considering some sort of restructuring,” he said.

Matthew Flaherty, vice-chancellor at Embry-Riddle Aeronautical University Asia, named Vietnam among potential future pockets of regional growth. “Countries like Vietnam, Laos, and Cambodia, that historically have not had large aviation infrastructure…as those markets invest more heavily in aviation, those are some of the most exciting opportunities because those countries have very little in the way of aviation training and education.”

Simon Spells, partner and head of aviation at Singapore’s Reed Smith law firm, added that Vietnam’s backyard continued to thrive. “From the deals I see that are coming across my desk at the moment, there is activity, with the leasing of spare engines and aircraft into Vietnam today,” he said. “I would say that those assets are being brought in to mainly service the regional market rather than the international at this stage.”

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