Viet Nam’s growth has yoyo-ed for a decade but rarely been much under 6 percent per year. As GDP has grown and Viet Nam is now a lower-middle income country (one reason Australia cut some of its aid last year).
“With such a large population of 90 million, even a small percentage of the population flying means big numbers for the industry,” Rankin says.
“Vietnamese people are travelling more and more, both for business, family visits and holiday, as income levels rise steadily.”
In older times it was only the few very wealthy or government leaders who flew, on old Soviet Tupolevs used by North Korean officials into the 2000s (Prime Minister Kim Jong-il visited Hanoi in 2007 in one).
All airlines have comprehensive international routes, with low cost carrier VietJet looking to expand to long haul flights rather than just cheaper regional hops.
Burke says the demand for aircraft and the entry of new private players into the Vietnamese aviation market is “actually driven mainly by the growth in domestic travel.”
VietJet, begun by property mogul Nguyen Thi Phong Thao in 2011, has attracted attention from the beginning, mostly for PR stunts like bikini-wearing flight attendants.
Other foreign airlines have tried and repeatedly failed to break into the domestic market thanks to monopolies, regulations and the need for a local partner. Foreign companies may only hold a 30 per cent stake.
Rankin says Malaysia’s AirAsia has failed to enter Viet Nam’s domestic market three times but will likely be successful early next year after partnering with a Hanoi company.
“Government resistance to foreign invested airlines has historically made it difficult for overseas carriers to enter the market,” he told bluenotes.
Viet Nam is of course still a socialist country and government maintains an interest in the major means of production - including aviation.
“Moreover, Vietnam Airlines guarded its lucrative monopoly jealously until it reached accommodations with the later private entrants and, to its credit, it has provided reasonably competitive services at each stage of the market’s development,” Burke says.
This is just the beginning. Other, smaller airlines are also looking for a share in the growing market.
There are plans for another, smaller domestic airline in Viet Bamboo Airlines, which plans a focus on the country’s second-tier airports in provincial cities and will purchase 15 craft from Boeing.
Owned by conglomerate FLC, start-up capital is a small $US31 million but the plans for the boutique airline to bypass major hubs in HCMC and Hanoi are apparently down to congestion. Vietstar, operated by the military since 2010, has plans for the civil market as well.
Compared to similar markets in the region like Thailand, Burke says, Viet Nam still has “a long way to go to catch up.”
“There is plenty of room for more growth ahead,” he says.
Helen Clark is a freelance Asia correspondent