Strategic opportunities for Vietnam Aviation

The International Air Transport Association (IATA) called on the Vietnamese government to work with the air transport sector to strengthen the country’s economy through global air connectivity. IATA identified three broad strategic areas to focus on: infrastructure, passenger experience and cargo.

“Vietnam is a dynamic and rapidly growing aviation market. The successful development of aviation will pay big dividends to the Vietnamese economy. It must be treated as a strategic asset and handled correctly,” said Tony Tyler, IATA’s Director General and CEO in his keynote address at the Vietnam Aviation Day organized by IATA and Vietnam Airlines. Aviation contributes $6 billion to Vietnam’s GDP and supports over 230,000 jobs. Between 2008 and 2013, Vietnam’s passenger traffic grew by 96%.

Infrastructure

Infrastructure is a critical component of the air transport sector which needs improvement. Vietnam ranks 82nd in the Infrastructure Index of the World Economic Forum’s Global Competitiveness Report. Among the ten ASEAN states, Vietnam is ranked sixth. Vietnam is addressing these low rankings with significant investments. It has announced an aviation master plan to have 26 airports by 2020. Expansion programs are underway at Hanoi and Ho Chi Minh airports, with the new Long Thanh International Airport to be ready by 2020.

While encouraged by the positive steps taken to improve Vietnam’s infrastructure, IATA urged careful planning and industry consultation leading to a well-thought-out regulatory structure in advance of any change to the current structure and ownership of Vietnam’s airports. Vietnam has indicated plans to open its airports to foreign investment and management, and to privatize the Airports Corporation of Vietnam. “While airport privatization can provide access to the capital needed for infrastructure programs, we have seen enough spectacular examples of unintended negative consequences to urge caution. The most common being unjustified increases in charges or under-investment in the CAPEX plan as the private operator tries to squeeze out profit,” said Tyler.

“To balance the market power of privatized airports, Vietnam needs to establish an effective independent economic regulator that is in line with well-established international norms. That should bring about fair charging schemes aligned with International Civil Aviation Organization (ICAO) policies. Lower charges will also improve the viability of routes and allow Vietnam to reap the benefits from enhanced connectivity and increased traffic,” said Tyler. ICAO’s policies on charges are based on the principles of non-discrimination, cost-relatedness, transparency, and consultation with users.

Passenger Experience

Tyler identified the implementation of IATA’s Fast Travel program and the easing of visa requirements to improve the passenger experience in Vietnam.

Fast Travel: Tyler encouraged Vietnam to make it a priority to implement the six Fast Travel initiatives covering check-in, self-tagging of baggage, document check, flight rebooking, self-boarding and bag recovery. “Passengers have told us through the IATA Global Passenger Survey that they want to be able to do more things themselves. As Vietnam develops its airport infrastructure, it has the opportunity to build them around the self-service expectations of travelers,” said Tyler. He cited Doha’s Hamad International Airport, which opened this year with five of the six Fast Travel initiatives.

Easing Visa Requirements: Tyler urged a review of the visa requirements to enter Vietnam. “Tourism is important to Vietnam. Every tourist that decides to have a holiday in a neighboring country because of Vietnam’s visa process is a lost economic opportunity. Easing visa requirements can boost tourism,” said Tyler. In the Henley & Partners index of Visa restrictions, Vietnam ranks at 81 because only 47 nationalities do not require a visa to enter, as compared to Singapore (5th), Malaysia (8th) and Hong Kong (15th).

Cargo

While air freight accounts for a very small amount of Vietnam’s trade by volume, it represents 25% of Vietnam’s trade by value, or $29 billion. E-freight will help to improve the efficiency of Vietnam’s air cargo industry.

“A key step to implementing e-freight is the adoption of the e-Air Waybill (e-AWB). While Vietnam Airlines has been able to use e-AWB for domestic freight, it is unable to do so internationally as Vietnam has yet to ratify the Montreal Convention 99 (MC99). I urge Vietnam to ratify MC99 quickly so that greater efficiencies can be achieved in Vietnam’s air cargo sector,” said Tyler. MC99 provides the legal framework for the use of electronic document of carriage, paving the way for freight forwarders and airlines to use the e-AWB.

Ebola

In his keynote remarks at the Aviation Day, Tyler also addressed the concerns regarding the potential spread of Ebola by air.

“Ebola is a terrible disease. But it is very different from SARS, which had a devastating impact on aviation in Asia. The World Health Organization (WHO) has advised that the risk of transmission of Ebola during air travel or even when visiting an affected country is low. Having dealt with several outbreaks of communicable diseases over the years, the air transport industry is prepared,” said Tyler. Guidance materials have been developed by WHO, ICAO and IATA. IATA has specific guidance materials on communicable diseases available for maintenance crew, cabin crew, cleaning crew, and passenger agents.

“IATA is working closely with WHO and ICAO in a task force to ensure effective coordination of efforts in areas affecting civil aviation. WHO is the global expert. We will continue to follow WHO’s advice and encourage governments to do so as well,” said Tyler.

Read Tony Tyler’s speech >>