Asia Business Channel

Vietnam makes it easier to start an airline

Vietnam’s airline industry is looking to compete, expand and grow and it received great news this week when Vietnam’s Ministry of Transport (MoT) proposed eliminating the condition that airlines need to “conform to the government’s aviation development planning” and also proposed reducing the minimum capital requirements to establish and operate an aviation business.

The moves by the MoT follow Vietnam receiving its category 1 rank from the U.S. Federal Aviation Administration (FAA), which will allow direct flights between the U.S. and Vietnam by airlines from each country.

It also follows the recent launch in mid-January of Vietnam’s fifth airline, Bamboo Airways which received its Aircraft Operator Certificate (AOC) from the Civil Aviation Authority of Vietnam (CAAV) in December and launched its first flight in mid-January. Although barely established in the domestic market, Bamboo has already announced that it wants to expand beyond Vietnam and fly international routes.

In the meantime, Vietravel Group has sent the documents on establishing Vietravel Airline to the central province of Thua Thien Hue’s Department of Transport. If approved, Vietravel Airlines will be Vietnam’s sixth airline and it hopes to start flights before another new airline, AirAsia Vietnam begins its operations and flights in August.

Vietravel Airlines would be based in the central province of Thua Thien Hue and according to Vietravel Chief Executive Nguyen Quoc Ky, the airline would operate only chartered flights and make use of “available resources from current carriers for transport services.”

Similar to Bamboo Airways, Vietravel has to receive the government’s approval for its investment plan, but this became easier when the MoT proposed lowering the capital requirements for airlines.

According to the MoT’s proposal, the minimum capital to operate 10 airplanes should only be $13 million USD (300 billion VND), instead of the current $30.43 million USD (700 billion VND). The lowering of the capital requirement effectively allow multiple “small airlines” to serve the market.

The MoT also proposes that airlines with 11 ~ 30 airplanes would need $30.43 million USD (700 billion VND) instead of the current requirement of $43.47 million USD (1 trillion VND) to start their operations. Importantly, these minimum capital requirements do not distinguish between local and international airlines.

In order to stimulate Vietnam’s aviation industry, the MoT also proposed eliminating the condition that airlines “conforming to the government’s aviation development planning.” This means that investors should only need to meet the conditions pertaining to the scheme of ensuring the exploitation of planes, organizational structure, capital, business plan, and development strategy.

A representative from the MoT said that its reasonable to reduce as many requirements as possible so that Vietnamese airlines have maximum flexibility in establishing their businesses which are expected to include code-sharing and cross-investments with international carriers.

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