Airlines go on thorny path to penetrate budget aviation service market

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Hanoi Times English - 31 month(s) ago 4 readings

The Hanoitimes - A lot of budget airlines have been eyeing the Vietnamese market, but they have been warned that it is not easy to penetrate the market.

The Hanoitimes - A lot of budget airlines have been eyeing the Vietnamese market, but they have been warned that it is not easy to penetrate the market.

In mid October, AirAsia announced the decision to cancel the plan to purchase 30 percent of stakes of Vietnamese VietJet Air which now has the chartered capital of 600 billion dong, because the two parties could not reach an agreement o­n the use of AirAsia brand in the airline’s commercial activities.

Despite the unsuccessful affair, which means that VietJet Air will not get the support from AirAsia in technical issues, labor force training and technology transfer, the Vietnamese air carrier still has affirmed that it is nearly completing necessary procedures and gets well prepared for the first commercial flights to be taken by the end of 2011.

Under the plan released by VietJet Air, in the first phase of operation, it will fly with Airbus A320 and develop the air routes o­n the north-south backbone: Hanoi – Da Nang , Hanoi – HCM City , Da Nang – HCM City . After that, the air carrier will fly to other points in South East Asia, such as Bangkok , Singapore , Malaysia and North East Asian points, such as China , South Korea and Japan .

However, the detailed plan announced by VietJet Air still cannot clear up the doubt about if VietJet Air will take off o­n schedule. Since its establishment in 2007, VietJet Air has five times broken the promise of providing the first commercial flights.

Meanwhile, Lai Xuan Thanh, Deputy Head of the Civil Aviation Authorization of Vietnam ACCA, has said that VietJet Air still has not completed the procedures for getting air operator’s certificate (AOC), and has not submitted the report o­n aircraft chartering.

Back to AirAsia’s story, this was the second time the budget airline failed to join hands with a Vietnamese partner to jump into the Vietnamese market. Prior to that, in August 2007, Air Asia o­nce planned to cooperate with the Vietnam National Shipbuilding Industry Group (Vinashin) to set up a budget airline.

Meanwhile, AirAsia has been trying to expand its budget aviation service market share to compete with the big rivals: Jetstar Pacific Airlines, GoAir ( India ) and Cebu Pacific (the Philippines ).

Especially, AirAsia has announced the opening of the direct flight from Kuala Lumpur in Malaysia to Da Nang in Vietnam . The first flight o­n the route will be provided o­n December 16. It is expected that there will be four flights a week to be provided o­n Mondays, Wednesdays, Fridays and Sundays with Airbus A320.

Airlines have every reason to think of jumping into the Vietnamese budget aviation service market. The current high airfares make it impossible for many people to travel by air. Therefore, the number of passengers will increase significantly if they have the opportunity to access low cost services.

The operation of budget airlines in Vietnam has helped improve the quality of services and reduce the airfares. However, experts say it is always a big challenge for the new comers o­n the market. The story of Indochina Airlines, which had to stop flying just after o­ne year of operation, shows that airlines need to be very financially capable to exist o­n the market.

Those, who plan to jump into the market, also need to be informed that the national flag air carrier, Vietnam Airlines, is also planning to join the market, which means that they will have a big redoubtable rival.

Despite the fuel price increases, Vietnam Airlines still has been launching sale promotion campaigns, offering airfare discounts for both domestic and international routes. Vietnam Airline’s General Director Pham Ngoc Minh said the airline plans to have 115 aircrafts by 2015 and 170 by 2020.

However, experts say that the pieces of the “budget aviation service cake” would not be obtained easily. Vietnam Airlines will have to make heavy investment to upgrade the pilot force. Vietnam Airlines o­nce met big difficulties when opening new air routes, while it had many times to cancel flight due to the lack of pilots.

Source: TBKTVN

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