Airport and Ground Support Equipment , Air Traffic Management Systems (Avionics) , and Aircraft & Parts
Vietnam
Overiview
Airport and Ground Support Equipment 2004(Actual) 2005(Actual) 2006(Estimated)
Total Market 5 7 10
Local Production 0 0 0
Total Exports 0 0 0
Total Imports 12 7 10
U.S. Imports 2 3 4
Air Traffic Management Equipment 2004(Actual) 2005(Actual) 2006(Estimated)
Total Market 8 14 7
Local Production 0 0 0
Total Exports 0 0 0
Total Imports 8 18 7
U.S. Imports 4 5 3
Engines, Engine Parts and Aircraft Parts 2004(Actual) 2005(Actual) 2006(Estimated)
Total Market 60 50 42
Local Production 0 0 0
Total Exports 0 0 0
Total Imports 60 50 42
U.S. Imports 27 8 5
* The above statistics are in $ millions and are based on U.S. Census Bureau’s records and unofficial estimates.
Industry Organization: Aviation is one of the top priority sectors for development by the Vietnamese Government since it is viewed as a prerequisite to rapid national economic growth. The aviation industry in Vietnam comes under the principal jurisdiction and management of the Civil Aviation Administration of Vietnam (CAAV), a Government agency reporting to the Ministry of Transport.
Demand for Air Transport: According to the CAAV, total air passenger traffic carried during the period 2001 – 2005 reached 25.3 million with an average growth of 13.1% per year while the total volume of airport through-put of passengers was 53.5 million and achieved an average growth of 12.4% per year. In terms of airport throughput of cargo, the total volume over this period was 1.15 million tons and grew 19.4% per year on average. With regard to air traffic management, Vietnam Air Traffic Management (VATM), a subsidiary of CAAV, provided services to 1,036 million flight times with a total range of 1.2 billion km, representing average growth of 8.8% and 12% annually. The total revenue of the Vietnamese aviation sector over the period 2001-2005 was estimated at $5.4 billion, an average growth of 16.3% per year.
Passenger Traffic Forecast in Vietnam in the period 2000-2010.
Source: CAAV – 2001
In 2005, total airport through-put of passengers reached 14 million, a 16.66% increase compared with 2004, and this figure is expected to rise to over 20 million by 2010. Of this, in 2005, Vietnam Airlines (VNA) carried 6 million passengers (2.8 million international and 3.2 million domestic), an 18% year-on-year rise while Pacific Airlines (PA) and Vasco carried approximately 300,000 passengers, a 24% increase over last year. The total throughput air of cargo is estimated to grow 14 percent each year, reaching approximately 576,000 tons in 2010.
At present, there are 25 domestic and 74 international air routes operating in Vietnam’s Flight Information Regions (FIR). The country currently operates a network of 22 major civil airports including three international ones: the Noi Bai in the north (Hanoi), Danang in the center and Tan Son Nhat in the south (Ho Chi Minh City). The Tan Son Nhat airport, with a capacity of 5 million passengers per year, is the largest airport in country, handling about 75 percent of the country's international passenger traffic. In terms of total airport through-put passengers, in 2005, southern airports, under the Southern Airports Authority (SAA), handled about 55% (7.7 million) of the national total, middle airports (under the Middle Airports Authority - MAA) about 13.57% (1.9 million), and northern airports (under the Northern Airports Authority - NAA) about 31.43% (4.4 million).
Major Local Airlines in Vietnam: VNA and PA are the two major air carriers in Vietnam. In the near future, the aviation sector is expected to be open to private and foreign companies under certain conditions. As of August 2006, VNA and Vasco, a subsidiary of VNA operating short haul domestic flights, were operating a fleet of 39 airplanes including ten B777-200ER, one B767-300ER, ten A320s-200, six A321s-200, one A330-200, three ATR72s-500, six ATR72s – 200, and two Fokker 70s. PA’s fleet includes two leased Boeing 737-400s and one Airbus A320-200 (as of September 2006). In 2005, VNA accounted for 42% of the total passenger traffic in Vietnam including international and domestic flights.
In addition, there are more than 30 airlines operating international flights to Vietnam as of 2006. Industry experts expect that as many as 30 additional air carriers will enter the Vietnam market over the next ten years.
Aircraft Maintenance Centers: VNA owns and operates two major commercial maintenance centers, namely A75 in HCMC and A76 in Hanoi, which independently perform both daily and periodical checks and maintenance according to JAR/VAR-145 standards. A75 mainly focuses on Boeing aircraft while the center in Hanoi concentrates on Airbus airliners. At present, A75 and A76 can carry out maintenance services at the following levels: Dcheck (F70 and ATR72), A320 (8C-10Ycheck), B767 (Acheck), and B777 (2Ccheck). To improve the efficiency of the A75 and A76 and allow them operate as an independent business unit, VNA has carried out a plan to convert and merge them into a limited liability company under VNA some time after the end of 2006. In addition, VNA also seeks to establish a joint venture with a foreign company to provide aircraft maitenance, repair, and overhaul services to VNA’s fleet and other international carriers. In May 2006, VNA signed a memorandum of understanding with the Philippines-based Milcon Gulf Group concerning a possible a joint venture in the near future.
In addition to its self-maintenance facilities, Vietnam Airlines also has maintenance contracts with Air France, AMECO of China, China Airlines, Evergreen Aviation Technologies, GAMECO, Hong Kong Aircraft Engineering Co, Lufthansa AERO, MTU Maintenance Hanover, Royal Brunei Airlines, Safe Air of New Zealand, and TAT Industries of France.
Air Traffic Management: Vietnam’s FIR is divided into two areas, namely Hanoi and HCMC. At present, VATM covers FIR Hanoi and HCMC with two area control centers (located in Hanoi and HCMC), three approach control centers (in Hanoi, Danang and HCMC), 17 airport air traffic control towers, six radar stations, 16 satellite stations, 40 beacons, 20 VHF stations, and tens of digital microwave links. In 2004,VATM provided air traffic management services to nearly 100 airlines operating on 23 international routes and 15 domestic routes.
Market Liberalization: The Government is seeking to open its aviation sector to foreign carriers. The liberalization process, however, will proceed gradually in several steps, given the perceived weakness of the domestic air transport industry. The Government will phase in each step in accordance with its regional and international trade commitments and obligations, i.e., CLMV (Cambodia, Laos, Burma, Vietnam) – ASEAN – APEC – WTO.
As of the beginning of 2006, Vietnam had signed bilateral aviation agreements with 58 nations and territories. In 2004, a milestone in the aviation sector was achieved with the signing of the U.S – Vietnam Aviation Agreement, which paves the way for eventual direct passenger and cargo flights between the two countries. United and American Airlines are already in the market, albeit not yet with direct flights, and VNA anticipates direct flights to the U.S. in 2007 or 2008.
Revised Aviation Law and Draft Decree on Aviation Services: On June 29 2006, the National Assembly passed the revised Aviation Law that regulates civil aviation activities including civil aircraft, airports, airlines and other aviation businesses, air traffic management, air transport services, security, civil liabilities, state management of aviation activities, and other matters related to the aviation sector.
This law provides that domestic air transport be handled only by local companies and joint ventures between local and foreign partners. As of October 2006, CAAV is drafting a Decree on Aviation Services based on the new Aviation Law, which is expected to be completed by the end of 2006. The timeline for the approval of this decree by the Prime Minister has not been made public yet.
One of the most important articles in this decree is the pre-qualification for establishing airlines in Vietnam including (1) access to aircraft (number and types of airplanes, ownership); (2) qualified workforce capable of conducting flight operations, maintenance, and air transport; (3) minimum legal capital with a cap on foreign shares in chartered capital; (4) business proposals and strategies; and (5) premises located in Vietnam.
It is expected that the private sector, including foreign companies (in joint ventures with Vietnamese partners), will be able to participate in domestic air transport by setting up new domestic and international airlines in Vietnam.
Best Prospects/Services
American companies are highly respected in Vietnam as the world’s leading equipment manufacturers and service providers in the aviation sector in terms of advanced technologies, quality, and professionalism. In the above projects, American companies will find significant opportunities for providing architectural and technical design services, engineering and construction services, and construction management services. In addition, over the last few years American firms have sold a considerable amount of airport ground support equipment (GSE), equipment for passenger terminals, air traffic management systems, telecommunication systems, software, aircraft parts as well as the transfer of aircraft maintenance and engine overhaul services.
Opportunities
Airport and Air Traffic Management Development: According to Vietnam's long-term development plan, by the year 2025, Vietnam’s aviation sector will need about $11.56 billion in investment to meet surging demands for air transport. Of this, around $6 billion will be spent on infrastructure. At present, the Government budget can only meet about 20% of the total investment required for the aviation sector. Raising sufficient funds for this development is an immense challenge for Vietnam now and in the future.
In the period 2005 – 2010, Vietnam plans to invest more than $1.3 billion in airport modernization, expansion and rehabilitation in order to accomplish an efficient network of 21 airports in operation including projects such as Noi Bai (second terminal), Na San, Dong Hoi, Cam Ranh, Chu Lai, Lien Khuong, Con Dao, Phu Quoc, Can Tho, Ca Mau, and Rach Gia. During period of 2010 – 2020, several other airports will be constructed or upgraded including the Long Thanh and Chu Lai (International), Cat Bi, Quang Ninh, Lao Cai, and Cao Bang (Domestic). A lion’s share of the investment in airport projects will come from Official Development Assistance (ODA) loans from foreign Governments such as Japan and France.
In addition, Air Traffic Management (VATM) will spend over $67 million on its 46 new and ongoing air traffic management projects. Funding for these projects comes mainly from VATM’s own budget accumulated from its business activities.
Air Fleet Development: Over the period 2006 – 2010, VNA plans to invest more than $1.2 billion in expanding and upgrading its aircraft fleet as well as other related facilities. By 2010, VNA is expected to own 32 planes out of 56 aircraft according to its expansion plan. By 2015, VNA anticipates increasing its fleet to 86 airplanes with an additional purchase of 19 aircraft and lease of ten beginning in 2012.
Under a plan proposed by a potential U.S. partner to restructure, the Pacific Airlines fleet could expand to 20 airplanes in the near future. The company recently launched a new online reservations and e-ticketing system that is expected to significantly lower its operating overhead as it competes as low cost carrier.
The aircraft maintenance service and parts segments are expected to grow sharply over the next five years. One of VNA’s strategies is to upgrade the existing facilities and human resources at the A75 and A76 centers in order to be able to maintain and overhaul up to 80% of mechanical and 60% of electronic parts for VNA’s fleet and other airlines. In addition, these maintenance centers will be further modernized to handle engine repair for a majority of VNA’s aircraft, and will seek to overhaul engines after 2010.
Resources
To enter the market, U.S. equipment suppliers and service providers are well advised to register their interest and capabilities with the appropriate agencies, particularly CAAV, VNA and its subsidiaries. The Commercial Service Offices in Vietnam should be contacted for assistance in the registration process and the selection of reputable local firms for collaborative arrangements, which is one of the prerequisites for success in the market. As a result, interested U.S. firms are urged to consider establishing joint ventures or other forms of strategic alliances with local companies in pursuing their projects in Vietnam. For more information, please contact the following addresses or visit the following websites:
· Le Son, Commercial Specialist
U.S. Commercial Service
U.S. Consulate General in Ho Chi Minh City
E-mail: Le.Son@mail.doc.gov
· Ha Ngoc Anh, Commercial Specialist
U.S. Commercial Service
U.S. Embassy in Hanoi
E-mail: Ha.Anh@mail.doc.gov