Vietnam Aviation

Vietnam is the world’s seventh fastest-growing aviation market. For the period 2016-2021, Vietnam is expected to have the highest average growth rate in Southeast Asia at 17.4 percent, compared to the 6.1 percent in ASEAN. The major drivers of this development include a growing tourism industry, the emergence of low-cost carriers, and strong economic growth.

In 2019, Vietnam’s airports welcomed 116 million passengers, an increase of 12 percent compared to 2018. Cargo increased by 11 percent to 1.5 million tons and aircraft movement increased by 13 percent to 740,000 flights. However, due to the negative impact of the COVID-19 epidemic, the Civil Aviation Administration of Vietnam (CAAV), the agency under the Ministry of Transport (MOT) that regulates the aviation industry, forecasts that the number of air passengers in Vietnam will likely drop by 46% to 43 million this year and Vietnamese carriers could lose more than $1.3 billion or worsen in revenues. While the aviation industry is struggling, the huge investment in aviation infrastructure and the potential growth of MRO services are the bright spots for Vietnam’s aviation future.

Aviation Infrastructure
Vietnam has 22 airports, of which 11 are international and 11 are domestic. The total designed capacity of Vietnam airports is approximately 96 million passengers per annual (mpa) while the volume of passengers through airports in 2020 is expected to reach 127 million in 2020 (without the Covid 19 scenario), which causes overloaded to most of the airport hubs. The Government has set key priority for airport infrastructure investment from now till 2030 by investing in the construction of 6 new airports and upgrading most tourism hub airports with a total investment of approximately $16 billion to increase to a total of 28 airports (14 international and 14 domestic airports).

Currently, Airports Corporation of Vietnam (ACV), the largest airport operator in Vietnam, is working to expand its two largest airports – Tan Son Nhat (Ho Chi Minh City) with investment in $470 million- 20MPA T3 terminal and Noi Bai (Hanoi) with investment in 30MPA new T3 terminal to address overloaded capacity issues. Other short-term expansions are $129 million - 5MPA T2 Terminal at Vinh Airport, $155 million -5MPA T2 terminal at Cat Bi Airport. In the longer term, the construction of the new giant Long Thanh International Airport (Dong Nai) -Phase 1, a $5.45 billion- new 25MPA T1 terminal, will start in 2021 and smaller new Sapa project is also in the pipeline. Other long-term expansion projects at Danang, Cam Ranh, Dong Hoi, Dien Bien Airport are under the investment preparation phase.

The legal provision in investment and financing are key obstacles to speed up aviation infrastructure projects. The Government is working on a draft decree of PPP Law proposing new mechanisms for private sector to invest in airport infrastructure.

Maintenance, Repair, and Overhaul (MRO)
As of 2018, the MRO market of Vietnam was worth US$542 million, while the size of the MRO market in Southeast Asia is US$5.8 billion. This clearly shows the Vietnam market is still in its early development stage. As of 2019, there were 190 aircraft in the Vietnamese fleets. With the fleet growth rate at 13.3% per year, Vietnam is expected to have about 400 aircraft by 2035. However the capacity of MRO companies operating in Vietnam only meets 25% of the needs with 4 main MRO service providers including VAECO (Vietnam Airlines Engineering Company, VSAE – (Vietstar Aero Engineering), SAAM (Southern Airports Aircraft Maintenance Services) and AESC – (Aerospace Engineering Services), while 75% of the services are being outsourced. Given the extensive infrastructure development, the rapid fleet growth rate in the next 10 years, and the high rate of MRO services being outsourced, Vietnam is certainly one of the most promising markets in the region and the world.

U.S. companies are highly respected in Vietnam as the world’s leading equipment manufacturers and service providers in the aviation sector and are known for their advanced technologies, quality, and professionalism. U.S. companies will find significant opportunities in the following areas:
• Architectural, engineering and construction management services
• Airport ground support equipment handling system
• Safety & Security equipment and solutions
• IT solutions for airport operation and management.
• MRO services

08/11/2020