The recent dissolution of Indochina Airlines (ICA) and Trai Thien Air Cargo revealed the difficulties smaller companies face in competing in the country’s civil aviation industry.

Indochine Airlines had its license revoked for failure to ensure operations 

Private airlines struggle

Deputy Director of the Civil Aviation Administration of Vietnam (CAAV) Lai Xuan Thanh said before deciding to revoke ICA’s license, the agency had carried out an inspection and discovered the company was incapable of ensuring the operation of its flights.

ICA only launched its first flight over six months after receiving a license.

During the first year of operation, the airline, owned by Musician Ha Dung, was evaluated at USD67 million. Its brand was valued at USD270 million based on a belief the company would enlarge its aircraft fleet from three to ten in the following year.

Licensed in May 2008, the airline was said to have invested VND570 billion (USD27.12 million) during its first year of operations. However, the closure of the airline meant the investors lost their entire stake.

Trai Thien Air Cargo was licensed in June 2008 with registered capital of VND500 billion (USD23.79 million) but had yet to launch a single flight before having its license recently revoked.

Despite receiving investment from Australia’s Qantas Airways, the budget airline, Jetstar Pacific Airlines (JPA), has absorbed losses for many years.

JPA is in a desperate need of restructuring in order to stave off possible bankruptcy. It may be merged with national carrier Vietnam Airlines in the near future.

Despite running flights for over a year, Air Mekong’s costs have outstripped their returns. This situation may continue, due to a slowdown in the aviation market.

Vietnam Airlines remains profitable

While private airlines are struggling to survive, Vietnam Airlines continues to profit.

Last year, the national carrier profited VND350 billion (USD16.65 million). Its profit in the three first quarters of this year was estimated at VND40 billion (USD1.9 million).

An anonymous aviation official said, “There won’t be much change in the aviation market in the next five years. This means that Vietnam Airlines will probably continue to dominate the market.”

Vietnam Airlines’ position will be greatly strengthened when JPA merges with the national flag-carrier, raising its market share to almost 100% of the domestic market. This may discourage fledging competition in the industry, particularly in term of air ticket prices.