Vietnam’s air freight: How to realize 'flying dream'?

By Dang Hoa - Dec 18, 2017 | 10:28 PM GMT+7

TheLEADERVietnam's air cargo transportation brings about 25 per cent of the total export value though it currently accounts for less than one per cent of total export volume.

Vietnam’s air freight: How to realize 'flying dream'?
Cargo services of Vietjet Cargo

In recent years, the air freight market of Vietnam has seen remarkable development. The development of aviation has made a strong contribution to connecting the world's economies. As a result, businesses, as well as key export products of Vietnam, have the opportunity to gain faster access to the international market.

According to Do Xuan Quang, General Director of Vietjet Cargo, Vietnam's air cargo transport currently accounts for less than one per cent of total exports (about 1.1 million tons) but brings about 25 per cent of total export value due to the specialized transportation of high-value items such as laptop and smartphone.

Do Xuan Quang, General Director of Vietjet Cargo

The supply chain of Vietnam's aviation sector contributes about US$3 billion to the gross domestic product (GDP). Vietnam's airlines mainly have the flight routes to the nations in Asia-Pacific region and Europe; however, there has not been any direct air routes to North America.

Total cargo through Vietnam Airlines in 2016 is 1.1 million tons and is expected to increase to 1.4 million tons by 2017 and 2.5 million tons by 2020. Currently, Vietnam has 157 aircraft and 28 helicopters. In the period from 2017 to 2020, there will be an additional 93 aircraft, increasing the number of aircraft to 242 by 2020.

In particular, Quang said that in the first quarter of 2018, Vietjet is expected to bring cargo aircraft into operation.

Top 20 countries importing air freight into Vietnam include South Korea, China, USA, India, Japan with the imported products are mainly consumer goods, electronic equipment, accessories for the garment industry. Imports from China topped with 74 thousand tons, accounting for 25 per cent of the market share of imports air freight into Vietnam.

Vietnam's total air freight export in 2016 is 355 thousand tons, mainly to northeast Asia markets such as China and South Korea.

Quang forecasts that Vietnam's air cargo exports will continue to grow rapidly with Europe is still the leading market. The export to ASEAN market continues to grow thanks to tax reduction policies of the governments.

Vietnam's air cargo industry has a lot of opportunities to develop, especially thanks to the government's policies to promote the development of air cargo. Also, aviation infrastructure is being repaired and newly built.

In recent years, global leading companies and corporations such as Samsung, Intel, or fashion businesses such as Adidas and Zara are also entering Vietnam.

In addition, Vietnam's e-commerce sector is rapidly growing at a rate of 15 to 23 per cent, bringing the average revenue of US$10 billion a year and also creating a huge opportunity for the air transport industry.

According to the International Air Transport Association (IATA), Vietnam and China have the fastest growing airlines in the world, showing the strong development of the Vietnamese aviation industry.

Quang said that the government’s policies, as well as the one-stop customs mechanism being implemented, will support Hanoi and Ho Chi Minh City to become the cargo hub not only of Vietnam but also South East Asia.

However, the air cargo industry is facing many challenges such as fluctuation of gasoline prices, airport infrastructure does not meet the demand for transportation of goods, airports are getting overloaded.

In addition, despite growing rapidly, Vietnam's air transport is still very small compared to other countries in the region. Vietnam’s airlines are only focusing on passenger transport; also, the air transport industry is also lacking human resources.

Despite many challenges, Quang said that the air transport market has a lot of potentials to develop. Therefore, Vietnam should have policies to facilitate this service sector.

Firstly, Vietnam needs to establish aviation logistics centers, especially at Noi Bai, Tan Son Nhat, and Da Nang airports. Currently, airports in Vietnam have no cargo handling area; therefore, the time and cost of transporting goods to the airports are very high. For example, to transport 1kg of lobster to Bangkok takes only one hour and 45 minutes while transporting time from Cat Ba to the airport is up to eight hours.

Secondly, more policies to simplify and eliminate unnecessary customs procedures and invest in infrastructure should be applied in order to develop Hanoi and Ho Chi Minh City to become the transportation hub of Southeast Asia.

Third, the government should open long-term Inland Container Depots (ICD) as currently, airports in Vietnam, especially Noi Bai and Tan Son Nhat, are getting overloaded, the cargo handling area is very narrow and not enough to meet the demand for freight transport.

Thus, creating a mechanism to promote the development of infrastructure and create a transparent and equitable business environment will help Vietnam's air cargo transport to fully exploit its potential, contributing to the development of Vietnam’s airlines in particular and Vietnam economy in general.