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VietJet Air is a start-up low-cost carrier based in Hanoi Noi Bai International Airport, Vietnam. The carrier began operating on 25-Dec-2011, after several delayed attempts, initially with 3 A320 aircraft to Ho Chi Minh City and Da Nang. VietJet had planned to utilise the AirAsia brand after receiving an investment from the Malysian LCC but was forced to go ahead with the VietJet brand when AirAsia was denied regulatory approvals.
Location of VietJet Air main hub (Hanoi Noibai Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider VietJet Air fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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Vietnam’s VietJet Air has become the latest Asian low-cost carrier group to announce a major aircraft order in support of an ambition to build a portfolio of LCC affiliates.
VietJet’s commitment to buy 62 A320 family aircraft may be small in comparison to the massive orders placed by AirAsia and Lion in recent years. But it is significant in that it shows VietJet is serious in becoming a pan-Asia player, following the model of AirAsia, Jetstar, Lion and Tigerair.
AirAsia, Lion, Tigerair and Jetstar operate across Asia-Pacific and dominate the Southeast Asian LCC market, accounting for about 77% of LCC seat capacity and 75% of the ASEAN-based LCC fleet. While Southeast Asia is a large and fast-growing market, five is a potentially unsustainable number of LCC groups, particularly when taking into account some of the countries also have very strong independent LCCs.
Southeast Asia continues to experience rapid LCC expansion even though some key markets are approaching saturation. The region’s LCC fleet is poised to grow by about 20% in 2013, approaching 500 aircraft at year-end. With some of the largest airline orders in recent years coming from ASEAN-focused LCC groups, rapid growth for the sector is assured for the medium to long term.
The LCC penetration rate within Southeast Asia is now above 50%, having steadily increased over the last 10 years from less than 5% in 2003. Even in the intra-Southeast Asia international market, which is about one-third the size of the region’s domestic market, LCCs now account for 50% of total seat capacity – a remarkable figure given that ASEAN has not yet moved to a single market concept like the EU.
Opportunities still remain for LCC market share gains in some countries, particularly Myanmar and Vietnam. These important pioneer markets have the lowest LCC penetration rates among the seven main ASEAN countries but LCC start-ups from both countries are expanding rapidly.
VietJet is pursuing further network expansion over the next few months as the carrier looks to cement its position as the leading low-cost carrier in the Vietnamese market. VietJet is adding three more domestic routes for a total of 14 and is also preparing to launch services to Seoul, which would be its second international destination after Bangkok.
VietJet overtook Jetstar Pacific as Vietnam’s largest LCC less than one year after its 25-Dec-2011 launch. By its second-year anniversary at the end of 2013 the carrier will account for over 25% of capacity in the domestic market and have a fleet of 10 A320s – on both counts double the size of Jetstar Pacific.
But Jetstar Pacific is finally preparing a response as the Jetstar Group affiliate plans to launch international services by the end of 2013 and pursue domestic expansion. Jetstar Pacific and its majority owner Vietnam Airlines have done little so far to try to combat VietJet’s rapid ascent. If VietJet continues to expand quickly a response is inevitable although VietJet could try to avoid a potential conflict by focusing more on expanding planned joint ventures in other Asian markets.
Vietnam’s VietJet Air has started to pursue a pan-Asia LCC group strategy, initially establishing a joint venture affiliate in Thailand. If successful, VietJet could climb up the rankings in the dynamic Southeast Asian LCC market, where it now accounts for a tiny 2% of capacity. But the risks are high as the Southeast Asian LCC market is already highly competitive, with 22 carriers and several more in the works.
The planned launch of Thai VietJet and the pursuit of joint ventures in other ASEAN countries represent an ambitious move given that VietJet is only 18 months old. VietJet has quickly established itself in Vietnam but its brand is an unknown in other parts of Asia, which will make it a challenge to overcome the first mover advantages of AirAsia, Jetstar, Lion and Tiger.
In its first venture, in Thailand, VietJet will face stiff competition from two well-established LCCs, Thai AirAsia and Thai Airways affiliate Nok Air. Lion also plans to launch a joint venture in Thailand, a market which is growing but is unlikely able to support so many LCCs.
VietJet Air is planning to add three new domestic and three new international routes in the coming months as Vietnam’s leading low-cost carrier continues to pursue rapid expansion. VietJet has already surpassed rival LCC Jetstar Pacific to become Vietnam’s second largest carrier after Vietnam Airlines with approximately a 15% share of the country’s fast-growing domestic market. The privately-owned carrier will see its share of capacity in Vietnam’s domestic market approach 20% by mid-2013 – an impressive achievement given it only launched services in Dec-2011.
VietJet now operates 10 routes, including one international route, with a fleet of six A320s. It plans to operate by the end of 2013 a fleet of 10 A320s on 16 routes – 12 domestic and four international.
Vietnam’s largest low-cost carrier, VietJet Air, is preparing to quickly expand its international network, taking advantage of growing demand for budget travel to and from Vietnam. The carrier launched its first international route on 10-Feb-2013, Ho Chi Minh-Bangkok, and is looking at several additional potential international destinations in Southeast and North Asia.
Two more international routes as well as additional capacity domestically, where VietJet already has captured a 15% share of the market, are expected in 2013. Vietnam is poised for further LCC domestic and international growth as LCC penetration rates in the country’s domestic and international markets are the lowest among major Southeast Asian countries. VietJet is well positioned, along with a rejuvenated but still very small Jetstar Pacific, to cash in on Vietnam’s LCC boom.
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