Infrastructure Failures Stifling Vietnam’s Growth Potential

 - October 12, 2018, 10:28 AM
VietJet recently announced three routes to Japan scheduled to start next month with Airbus A321s. (Photo: Airbus)

Network expansion coupled with rising passenger demand is casting a shadow over Vietnam’s airline industry and growth potential, as concerns about the inadequacy of airport infrastructure across the country mount.

According to the Ministry of Transportation, Tan Son Nhat Airport in Ho Chi Minh City requires significant restoration after suffering a rash of recent infrastructure calamities, including overcapacity, flooding, and visible cracks and deformations on Runway 07L/25R. 

A $191 million expansion project, which includes a call for investors and a target date of 2022, is under way to renovate terminals T1 and T2, increasing their combined capacity to 30 million passengers. The ministry has also approved building a third terminal capable of handling 20 million passengers per year as well as upgrades to runways, taxiways, and auxiliary facilities including a water drainage system to combat airport flooding.

Now carrying out feasibility studies to expand facilities at Long Thanh, Cat Bi, Vinh, and Phu Bai airports, Airports Corporation of Vietnam JSC (ACV) spearheads much of the expansion. According to the airport operator, Cam Ranh, Cat Bi, Phu Quoc, and Lien Khuong airports all suffer from undercapacity.

Elsewhere in the country, Vietnamese media outlets report damage at Runway 1B at Hanoi’s Noi Bai International Airport, including cracking and materials falling off from the expansion joints between concrete slabs.

The Vietnam airport debacle comes amid an expansion push from Vietjet, which recently announced three new routes to Japan (Osaka-Hanoi, Osaka-Ho Chi Minh City, and Tokyo-Hanoi), and a $614 million financing agreement with Mitsubishi UFJ Lease & Finance Company Ltd and France-based BNP Paribas Bank to purchase five Airbuses.

During the same ceremony, the budget carrier, together with France-based banking group Natixis and some Japanese equity underwriters, signed a memorandum of understanding valued at $625 million for another five Airbus aircraft.

Vietnam Airlines plans to acquire 20 A321neos and two A350s—the first arriving in December—and holds commitments for eight Boeing 787-10s scheduled for delivery starting next year. The national carrier plans to launch its 11th route from Vietnam to Japan starting October 28, offering seven flights per week from Da Nang to Osaka using Airbus 321s.

Meanwhile, Vietnamese real estate conglomerate FLC has established a new hybrid airline, Bamboo Airways, with a focus on serving international and niche markets. However, uncertainty looms after the airline failed to obtain the necessary licenses and missed its October 10 service launch. Bamboo has signed letters of intent for 24 A321neos and 20 Boeing 787-9s.

According to the International Air Transport Association, Vietnam ranks as one of the fastest-growing aviation markets globally and will become the fifth fastest-growing market by 2035.