Report Summary

In May 2008, the government approved the establishment of the country’s second private airline, a lowcost carrier named Air Speed-Up Corp, or ASP. The company was reportedly launched with initial capital of VND200bn (US$12.5mn), and would aim to lease 10 aircraft by the end of the year, initially focusing on serving the north-south domestic route. The first private airline, Vietjet Aviation, had received authorization in November 2007, with registered capital of VND600bn (US$36.8mn). Ahead of either ASP or Vietjet launching operations, three carriers currently control the domestic market: state owned Vietnam Airlines (with an 80% market share), Jetstar Pacific Airlines (now a government joint venture with Qantas of Australia) and Vietnam Air Services (a subsidiary of Vietnam Airlines). According to the Civil Aviation Administration of Vietnam, the market will grow at an annual rate of 12-14% in 2006- 2010, and at 9-11% in 2010-2015.

Jetstar Pacific was formally launched as a new low cost carrier at the end of May, changing its name from Pacific Airlines. Taking these 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 11.1% in 2008-2012 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 GDP growth likely to average 7.9% 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 10.3% over the next five years, followed closely by maritime freight (9.9%), pipeline throughput (9.1%) and rail (8.7%).

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 9.7% a year in 2008-2012. Under BMI’s freight transport rating system, Vietnam achieves a composite score of 61.2 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 US7.5bn in nominal terms by 2012, representing 4.3% of Vietnam’s GDP.