Vietnam Airlines stated it aims to become the “number three” airline in Southeast Asia by 2015 and “number two” by 2020 (Vietnam Business Forum, 27-Aug-2010). To achieve this, the carrier plans to continue expanding its fleet and expects to have 110 aircraft by 2015 and 160 by 2020. It also plans to conduct research into the possibility of specialised cargo operations. In terms of its route network, the carrier plans to strengthen its domestic and Greater Mekong sub-region services, with services in Southeast Asia, South Asia, Northeast Asia and South Pacific to be developed.
Vietnam Airlines aims to be 'No 2' in Southeast Asia by 2020
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Vietnam Airlines 2017 outlook: slower growth and smaller profits as competition intensifies
Vietnam Airlines has grown rapidly and profitably over the last two years, despite intensifying from its fast-growing local rival VietJet Air. Vietnam Airlines is now only one of four airlines in Southeast Asia with more than 20 million annual passengers.
Passenger traffic has grown by more than 50% since VietJet’s launch at the end of 2011, while the flag carrier has accumulated approximately USD150 million in pre-tax profits. In 2016 Vietnam Airlines achieved 19% growth and record profitability.
However Vietnam Airlines plans to grow at a much slower rate in 2017, and intensifying competition will likely impact profitability. Opportunities for further domestic expansion are becoming more limited as the market becomes more saturated, while international expansion poses more challenges and risks.
Turbulence will hurt Southeast Asia’s airlines in 2017 as overcapacity bites
Southeast Asia is a region with enormous growth potential but a relatively cloudy outlook for airlines given the intense competition and overcapacity concerns.
Demand is on the rise, boosted by a growing middle class, rising discretionary incomes and relatively strong economies. Nearly every country in Southeast Asia continues to post GDP growth above the global average. The Philippines, Vietnam, Myanmar and Cambodia have been particularly strong with GDP growth in the high single digits.
However, GDP growth slowed to less than 5% in the rest of Southeast Asia in 2016 and is expected to only pick up slightly in 2017. In several Southeast Asian markets, capacity has been growing faster than demand, impacting yields as competition has intensified. With an order book that equals the size of the current active fleet and several airlines pursuing strategic expansion, capacity may again be added at a rate exceeding demand in 2017.