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Vietnam Freight Transport Report Q4 2008 (Business Monitor International) Market: Logistics Published Date: 17/11/2008 Market Research Report Title: Vietnam Freight Transport Report Q4 2008 Table of Contents: View Table of Contents Report Type: Market Report Country: Vietnam Number of Pages: 52 
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Summary: Jetstar Pacific, Vietnam’s second largest airline which is now 18% owned by Qantas of Australia, said in August that it would drop its flights to the central Vietnam beach resort city of Nha Trang due to high fuel costs, and would instead open routes between Ho Chi Minh City and Bangkok in Thailand, Siem Reap in Cambodia, and Singapore. The airline had designed an operations plan in 2007, using a reference fuel price based on a US$70 barrel of oil, a level which has been exceeded throughout 2008 (at the time of the announcement in August the crude oil price had dipped from earlier peaks in 2008 to US$114/bbl, still over 60% higher than the reference price). Deputy CEO Nguyen Thi Thuy Binh noted that fuel now accounted for 60% of operating costs adding that ‘building a new business plan will focus on the routes on which travel demand is high, so that would help the airline fuel the financial impact from fuel prices.’ Jetstar said it would gradually shift the composition of its fleet from the current Being 737-400 aircraft to more fuel-efficient Airbus A320s. It aims to have a total of 30 A320s by 2014, the first of which was due to be delivered before the end of Q308. Taking this and other developments into consideration, along with our projections for the growth of demand, BMI’s newly released Vietnam Freight Transport report concludes that airfreight traffic will increase by an annual average of 10.1% in 2008-20112, measured in tonnes per km.
A number of factors underpin our optimism. One is the realistic prospect of a long, export-led boom in Vietnam, with annual GDP growth likely to average 7.5% in 2008-2012, only fractionally slower than the 8.0% rate achieved in the preceding five-year period. Vietnam Airlines is poised for strong growth.
Infrastructure plans are also ambitious. The government has announced plans to build the country’s largest airport at Long Thanh in the southern province of Dong Nai, at an estimated cost of nearly US$8bn. Noi Bai International in Hanoi will also be modernised, with a new runway and the enlargement of the cargo terminal.
Our overall outlook for the nascent freight transport industry across the different modes is bullish. In road haulage, we have trimmed our forecast to take account the effects of high oil prices and continuing infrastructure bottlenecks. But we still see road-freight turnover running ahead of the general rate of economic expansion in Vietnam. We see it growing by an annual average of 9.4% over the next five years, followed closely by maritime freight (9.1%), pipeline throughput (8.7%) and rail (8.3%). Full World Trade Organisation (WTO) membership, achieved in early 2007, can be seen as supportive of greater freight transport turnover relative to GDP across all modes, particularly so for shipping. We now expect total freight carried growth across all modes, measured in million tonne-km (mntkm), to average 8.9% per annum in 2008-2012.
Under BMI’s freight transport rating system, Vietnam achieves a composite score of 60.3 out of a potential maximum of 100. Vietnam’s stronger points are freight growth, transport infrastructure growth and the transport intensity index, which measures the dynamism of the country’s foreign trade. BMI views Vietnam as being weaker in the other four categories: economic and political long-term risks and the country’s regulatory and competitive environment (corruption is a particular problem).
According to our latest estimates, the total value of transport and communications GDP will rise to US7.3bn in nominal terms by 2012, representing 4.3% of Vietnam’s GDP.
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