Competition heating up Vietnam’s aviation market
  • | VietNamNet | April 14, 2011 03:07 PM

Vietnam has officially become a competitive aviation market after more licensed airlines have taken off and declared competition with the national flag air carrier Vietnam Airlines.

On April 8, Air Mekong signed a strategic cooperation agreement with the Vietnam Post and Telecommunication Group (VNPT). Under the agreement, VNPT will sell air tickets for Air Mekong at its 18,000 post offices nationwide. In return, Air Mekong will carry postal parcels for VNPT.

The move by Air Mekong, which was made six months after it provided its first commercial flight, shows that despite the disadvantages of being a late comer on the market, the air carrier still has the ambition to obtain “pieces of the market cake”, and it is slowly reaching that goal.

Chair of Air Mekong, Doan Quoc Viet, said that the cooperation with VNPT is the first step which lays a foundation for the air carrier to think about penetrating further into the field of air cargo carrying in the future.

Meanwhile, a manager of VNPT revealed that with the strategic cooperation, the group will prioritize using the transport services provided by Air Mekong. VNPT will also encourage its employees to take the flights provided by its strategic partner on domestic air routes.

According to experts, aviation is a special business field, in which the costs to run apparatuses, aircrafts and expenses for the labor force of different airlines are not quite different. Meanwhile, the airfares are also not much different because the State is still imposing a cap on airfares. Therefore, in order to compete with others, airlines have to use special tricks.

It is clear that expanding the booking networks is one of the biggest difficulties that any new air carriers would face. Therefore, it would be a wise move for the airlines to think of fully taking advantage of the networks of VNPT or any other partners to further develop distribution.

Prior to that, Jetstar Pacific signed a contract with VNPT under which the payment for airfares is carried out through 1100 post offices of VNPT. Besides, the air carrier also signed a lot of strategic cooperation agreements with commercial banks in order to carry out the sale of e-tickets.

Experts have commented that Air Mekong is following a wise strategy to expand its business. Air Mekong has formed agreements with partners to foster its strength. Besides, it has decided not to directly confront the giant Vietnam Airlines. It has decided to provide flights on the air routes which have become overloaded due to the high demand, and the routes that receive little attention from Vietnam Airlines.

The “niche market” strategy and the short distance and medium distance air routes have both helped Air Mekong minimize the losses which all new comers would incur. Just after three months of operation, Air Mekong had more than 120,000 passengers.

As for Jetstar Pacific, the air carrier also undertook a big restructuring and decided to become a budget airline to become “different” from the “elderly brother” Vietnam Airlines. With the measures to cut down expenses, Jetstar has committed that its airfares will always be lower than those offered by other air carriers by 10 percent.

The low-airfare policy has helped Jetstar Pacific increase its market share from 14 percent to 23 percent in 2010. The air carrier now also has the passengers who are medium income earners who want to fly with the best savings rates.

Experts now comment that Vietnam’s aviation market has heated up with the competition, though 70 percent of the market share is still being held by Vietnam Airlines.

To date, six air carriers have been licensed and have been providing air transportation services for the 80-million people market, including Vietnam Airlines, Jetstar Pacific, Vasco, Indochina Airlines, Air Mekong and Vietjet Air.

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