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February 12, 2008

First private carrier marks market opening

The kick-start of VietJet, the first private airline in Viet Nam, is considered the most noteworthy move so far by the Vietnamese government in opening up the aviation market.

The policy allowing businesses from all economic sectors to provide air transport services has been in place for a long time, as stipulated in the Viet Nam Civil Aviation Law, promulgated in 1991. The revised Civil Aviation Law, which came to effect in 2007, has provided more detailed regulations on the matter.

According to Minister of Transport and Communication Ho Nghia Dung, the establishment of new aviation firms is necessary to create a highly-competitive aviation market in the context of rising demand for air transport.

The government has agreed in principle to the establishment of the second private aviation company in Viet Nam, Phu Quoc Air, Dung noted. Some State and joint stock companies are also eying investment in air transport services. However the Viet Nam Aviation Department suggested that the government permits only two or three more aviation companies until 2010 as this field has high requirements for capital, safety and security.

VietJet plans to fly on domestic routes linking Ho Chi Minh City, Hanoi and Da Nang and international air routes from Hanoi and Ho Chi Minh City to Singapore and Thailand at competitive prices.

"We will establish a partnership for mutual development with the aviation community in the Vietnamese market in order to ensure customers highest benefit," said Robert Hughes, managing director of VietJet.

Facing great challenges of a newly-established company, VietJet will hire foreign experts for management work and train its personnel home and abroad with the aim of applying high technical standards right at its start at a reasonable cost.

VietJet leaders openly talked about their ambition to win over market shares from its two senior rivals, Vietnam Airlines and Pacific Airlines, when VietJet is officially put into operation in November.

However, Vietnam Airlines General Director Pham Ngoc Minh said there is plenty of room in the market for other airlines, and Vietnam Airlines aims is to take the lead to ensure a healthy competition in air service supply.

Even though both Vietnam Airlines and Pacific Airlines do not show concern about the establishment of VietJet, there are already signs of a underground wave of competition among aviation firms. In the latest move, Vietnam Airlines has signed a contract to purchase 30 airplanes from the Airbus group in preparations for its plan to open more air routes to raise its competitive edge.

Besides five local airlines, 43 foreign airlines are operating flights to Viet Nam. Over the past five years, the aviation sector recorded an annual growth rate of 15 percent, especially a growth rate of 20 percent in 2007.

Domestic airline companies themselves said the establishment of more airlines will create a breakthrough in the Viet Nam aviation sectors transport capacity and competitive edge.

The aviation sector has worked out a development strategy until 2020, which estimates that US$15 billion will be needed to develop the national fleet, airports and increase air control capacity. Under the strategy, country will have a total of 26 airports, including 10 international airports, to be located in all three regions.

To meet the urgent need for human resources, Vietnam Airlines is negotiating with World Airlines Services for their help in pilot training.

Courtesy VNA

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