Air Transport

Vietnam's government has approved the establishment of the country's first privately owned carrier, setting an important precedent in a market that is forecast to continue growing rapidly in the coming years.

The government at the end of November said it had approved the aviation license application of Vietjet. The new low-cost carrier will be based in Hanoi and will have a secondary base in Ho Chi Minh City. It plans to launch operations late in 2008 or early in 2009 and will use either Airbus A320s or Boeing 737-800s.

Vietjet will initially operate between Hanoi, Ho Chi Minh City and Danang, expanding later to international destinations such as Bangkok, Hong Kong, Singapore and points in southern China. In the longer term it plans to serve points in Japan and South Korea.

Vietnam's air transport market has been growing rapidly (see chart) with particularly strong traffic growth rates being recorded by national carrier Vietnam Airlines. The country currently has two other government-controlled airlines, Pacific Airlines and Vietnam Air Service (VASCO). Pacific, a low-cost carrier, recently became minority owned by Qantas Airways.

With a large population and a small number of air trips per capita - but an economy that is growing rapidly - the market is seen as having huge potential for airline growth. As a result several other groups are also looking to establish new airlines in Vietnam, including Malaysia's AirAsia.

Vietjet is capitalised at 600 billion dong ($37.5 million) and is owned by a group of local businessmen led by entrepreneur Nguyen Thanh Cong. It says it has "no plans to bring in a foreign airline as a partner as we are building a Vietnamese airline to reflect the best the country has to offer".