Vietnam Airlines has taken delivery of its final Airbus A350-900 that it had on order. The 14th aircraft joins the existing fleet of Airbus planes the carrier has and marks the end of an era of wide-body expansion. The carrier has been growing continuously over the past few years, and as Vietnamese carriers finally receive the long-awaited permit to fly to the United States of America, Vietnam Airlines is at the start of what could be a very interesting war.
Vietnam Airlines is a unique carrier. Its fleet consists of a massive number of some of the most technologically advanced aircraft. The airline has grown over the past decade to become a major threat to the Gulf carriers which played a part in forcing other national airlines to report significant losses. However, Vietnam Airlines has survived. Not only has it remained in operations, but it has played its cards in such a way that has put it at the forefront of the Vietnamese aviation industry. Now while the airline isn’t struggling at the moment, rising fuel costs pose a major threat to the carrier’s future.
Not only that, however, but competition from its home country are possibly the biggest threat to the airline’s success. Now despite the Gulf Airlines continuously hitting the Premium airline market hard, Vietnam-based low-cost carrier, Vietjet has been able to quietly grow its operations and build up its network to play in the league of Vietnam Airlines.
The low-cost airline is going to be massive, if not already. Vietjet Air signed an agreement a few years ago for up to 200 Boeing 737 MAX aircraft, which would place the airline at the top spot for short haul operations in Vietnam. Due to Vietnam Airlines’ business model, such a big aircraft order is not financially viable, giving Vietjet Air one key advantage. But Vietnam Airlines’ model does feature some positives of course – Vietjet Air will likely struggle to keep its cash flow stable as a result of the one-off expenses of taking delivery of a new aircraft.
Although Vietnam Airlines has expanded its fleet of Airbus A321s which now comprises of over 50 Airbus A321-200s and 5 Airbus A321Neos (with 6 on order) which may be enough to combat the threat for the short term, there’s more. Vietjet has long awaited the day it would launch long haul, low cost flights, something many airlines have looked at. The airline’s plans almost came together back in 2014 by which time it would’ve decided on most of the details including aircraft type, first routes and more. The intention was to launch the flights only a year later, although they never came together.
However, the plans have once again shaped, with the airline gradually revealing its ambitions over the past two years. The deputy director, Jay Lingeswara, re-affirmed in 2017 that they were ‘taking a very seriously look at doing long-haul ops’. Building on Jetstar Australia’s success on long-haul low-cost flights, Vietjet announced at an event in 2018 that it targeted a route from Brisbane to the Vietnamese city of Ho Chi Minh by the end of 2019. Additionally, Vietjet Air admitted it was interested in other long-haul flights (longer than 7 hours) to the likes of the US and Europe.
This poses a threat to Vietnam Airlines who are also looking at growing in those markets. The most important is possibly that of the United States of America which granted Vietnamese airlines the right to fly to destinations within the country on February 14, 2019. However, Vietnam Airlines has confirmed that there is one major issue with launching non-stop flights to the United States – they’re unprofitable: “The plan is the end of 2019. But if it is not feasible and it is too much we have to wait to find a way to work with partners to improve the traffic mix. Like most of the airlines, like Philippines and Thai, we don’t have enough business travellers. We are just dependent on visiting friends and relatives. That is no way to make money,” explained President & CEO of Vietnam Airlines, Mr. Duong Tri Thanh.
Thanh said that thanks to the Vietnamese population of 2 million living there, there is hope for direct flights to the United States. He admitted, however, that the passengers are looking for cheaper fares rather than faster travel times that the direct services would offer over one or two stop flights.
The newest airline in the Vietnamese aviation market, Bamboo Airways has also revealed its intention to operate flights to the United States. The carrier, which has 10 Boeing 787-9s on order (capable of operating the non-stop services) has set a launch date for late 2019/early 2020.
Three airlines, one small market – it will undoubtedly be difficult to make a route to the US profitable, although Vietnam Airlines understands that it won’t be easy. Vietnam Airlines will see extremely tight competition from its main rival, Vietjet Air, in the coming years. However, with the advantage of an outstanding history and a long-haul fleet already secured, Vietnam Airlines remains, at least for now, a strong and stable flag carrier.