Date of Submission: August 24, 2015
Although aviation is considered as the “global connectivity that ultimately strengthens productivity and economic growth as a whole” (J. Perovic, 2013), it is also affected by several macro-level and socio-economic factors such as rising oil prices, contagious crisis, concerns about the eruption of bird flu, Asian tsunami, etc. (International Air Transport Association, 2007).
Vietnam Airlines (or VNA) which was originally established in 1956 under the name Vietnam Civil Aviation is the largest full-cost airline in Vietnam (CAPA – centre for Aviation). With a 40.6% market share, Vietnam Airlines has a tremendous opportunity in ...view middle of the document...
Meanwhile, the other local competitors such as Vietjet Air, Jetstar mostly serve low-end customers. VNA also designs a variety of routes in both internal and external flights. Namely, VNA has about 90 routes while that of Vietjet Air and Jetstar are 18 and 16 respectively. Furthermore, Vietnam Airlines is an official member of the Skyteam airline alliance which allows it to have wider international route network.
Vietnam Airlines is the first airline in Vietnam which also contributes to its reputation as a leading brand in domestic market. After more than 20-year joining the industry, Vietnam Airlines holds the dominant market share in Vietnam's aviation market with 40,6% market share of international passengers transportation and 63,2% market share of domestic passengers transportation (Bao Viet Security, BVSC). According to BVSC, Vietnam Airlines really focuses on investment and development of technology and the fleet for continuous improvement in serving passengers. Currently, VNA invested in wide body A350-900 and B787-9 to upgrade the quality of services for an increasing number of high-income customers (Vietnam Airlines, 2014). In the period from 2014 to 2018, the company will invest 63,297 billion for fleet expansion, with the goal of having the fleet 116 which is energy saving by 2018 (BVSC). Those are important factors in increasing efficiency and competencies of VNA in the fierce competition.
Although VNA is in the leading position between local airlines, comparing to other international airlines, its performance is not really good, especially before equalization. In previous year while VNA was still a state-own airline, the operations and decisions making activities somehow took time and inefficient. According to BCG, cost of materials and cost of outsourced services account for 38% and 43% total cost respectively. The fluctuation of these costs reduces VNA’s profit. Furthermore, the service quality from Vietnam Airlines is evaluated as worse than that of other international brands. Although VNA receive financial support from government, its financial capability in international perspective is fairly limited. The number of planes belonged to VNA are only 83, six times lower than China Southern Airlines (BVSC). All of these factors cause VNA’s lower competencies in regional and international markets.
The diversification and globalization of the economy has been motivating the export and import operation among countries, creating chances for development of the transport market, especially airline market. Viet Nam has become a member of WTO. The recovery of the economy promotes the demand of tourism. Wherefore commercial intercourse and tourism keep growing and move forward to Asia area.
According to BMI, the amount of tourists come to Viet Nam (inbound) and tourists from Viet Nam travel abroad (outbound) is increasing around 5.3% and 11.4% in the period of 2014 – 2018.