Advertising
  • News
  • Airlines
  • Business strategy
  • Vietnam market 'over stimulated': Jetstar Pacific

Vietnam market 'over stimulated': Jetstar Pacific

Vietnamese low-cost carrier Jetstar Pacific says domestic passenger growth has slowed in 2017, to a rate of 14-15% compared with 30% per annum previously.

"The market has probably been over stimulated in the last five years, so I don't think you'll see a lot of additional market simulation as we go forward," says Jetstar Pacific chief operating officer Leslie Stephens.

"We think it's going to be more natural growth. From whatever everyone is predicting it will be double GDP growth, so about 14-15% growth a year, about half the growth we've seen the last five years. We've certainly seen this in 2017."

The stimulation Stephens alludes to is due to the rise of low-cost rival VietJet, which has grown rapidly since its launch in late 2011. The carrier operates 44 Airbus A320 family aircraft, many of them deployed in Vietnam's domestic market, where it holds about 40% market share.

Despite being much older, with its origins in the 1990s, Jetstar Pacific operates 17 A320s and commands 15% of the domestic market. Vietnam Airlines, which owns 70% of Jetstar Pacific, accounts for around half the.

Speaking with journalists at the company's headquarters recently, Stephens says that longer-term prospects are good given Vietnam's rundown railroads and poor road infrastructure. These issues, in addition to the country's nearly 100 million inhabitants, make air travel particularly attractive. He says the country has 22 "good commercial airports," of which 18 can support jets.

Heavy capacity growth has hurt yields however, and Stephens says the domestic origin and destination market is especially challenging. Still, the carrier's load factors are a respectable 84%, although it fluctuates throughout the year.

It also helps that Jetstar Pacific is tightly integrated with Vietnam Airlines and Qantas, which owns 30%.

"Being part of the Jetstar group we have connections from Jetstar Japan and Jetstar Asia, and that helps bring traffic in. One of our best performing routes is Bangkok-Ho Chi Minh City, which has the most intense competition of probably any route in Asia."

In addition, Jetstar Pacific has derived passenger feed from Jetstar's March launch of Boeing 787 services from Melbourne and Sydney to Ho Chi Minh City.

Of the five million passengers Jetstar Pacific will carry in 2017, Stephens estimates about 15% are connecting passengers.

In addition, all of Jetstar Pacific's routes are codeshared on by Vietnam Airlines. For route planning, a committee comprised of Jetstar Pacific and representative of shareholders hold regular meetings to discuss schedules and routes.

Stephens is also optimistic about the government's efforts to increase ramp space at Tan Son Nhat, where aircraft parking has emerged as a major issue given the rapid increase in the Vietnam's airliner fleet, and increased international flying to the country. Still, slots are an issue, with no slots available between 7am and 7pm.

Related Content
Advertising
Advertising
What's Happening Around "Jetstar Pacific"