The aviation market in Vietnam is facing significant challenges that have made it difficult for foreign airlines to enter the market. Despite proposals from the Tourism Advisory Board to establish new airlines and partnerships with existing Vietnamese airlines, current regulations pose barriers to foreign participation.
The law specifies that foreign-invested airlines can only operate if their capital contribution is limited to 34% under certain conditions. This limits the ability of foreign airlines to enter the market directly, despite opportunities for partnerships with Vietnamese airlines. Industry experts have highlighted the challenges of profitability in the sector, with high input costs and limited prospects for returns on domestic flights. This has discouraged potential foreign investors from entering the market.
Domestic investors have also faced challenges in the aviation sector, with many airlines struggling to turn a profit. Recent market developments have shown the struggles faced by both Vietnamese and foreign investors, with some companies withdrawing due to financial concerns.
Industry stakeholders, including Bamboo Airways, have called for an increase in the foreign capital contribution cap to 49% to allow for greater strategic decision-making and operational control. In light of these challenges, industry leaders are calling for government support through policies such as reducing environmental taxes on aviation fuel, fees for international routes, takeoff/landing fees, and interest rates for airlines.
Overall, regulatory challenges, financial constraints, and profitability issues have made it difficult for both domestic and foreign airlines to thrive in Vietnam’s aviation market. However, industry stakeholders are advocating for policy interventions to support growth in the sector and encourage sustainable development in this important industry.
