Approval of Vietnam's Bamboo Airways Faces Delay

Doubts about its financial fitness and operational capabilities, have prompted Vietnamese authorities to delay the operators license of Vietnam’s third low-cost carrier, Bamboo Airways,
just a month before its inaugural flight in October, Nikkei Asian Review reported. However, concern over too much competition in Vietnam’s LCC market is also holding up the license, the report
noted.

Will it fly?
Will it fly?

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Vietnam’s airline market, formerly dominated by state-run Vietnam Airlines, underwent a drastic change following the debut of Vietjet Aviation in late 2011. By the first half of 2017, the
newcomer held 43% of market share, up from just 8% in 2012 and eclipsing Vietnam Airlines’ 42% share. The latter’s budget carrier, Jetstar Pacific Airlines, claims over 10% of market share, the
Nikkei report noted.
Bamboo Airways, headquartered at Phu Cat Airport (Quy Nhon City), is part of Vietnamese real estate developer and construction company FLC Group and was officially established in July.

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Large network targeted
The carrier is eyeing 24 domestic and 16 international routes by the end of 2023, mainly to destinations where FLC has resorts, including central Vietnam’s Binh Dinh Province and the northern
city of Thanh Hoa.
It has already signed a memorandum of understanding for the purchase of 24 Airbus A321’s, and it announced a commitment to buy 20 Boeing 787-9’s Dreamliner’s in June this year.
The Nikkei report noted that observers believe one reason authorities are dragging their feet is the weak creditworthiness of emerging real estate developers like FLC. The company, established in
2008, experienced rapid growth driven by its resort developments. Revenue reached 11.64 trillion dong (US$500 million) in 2017, almost a sevenfold increase from 2013.

Misleading site information?
Despite these figures, FLC’s financial base is seen as weak compared to Vingroup — Vietnam’s largest real estate company and is also considered weaker than Vietjet Aviation, which includes a
bank among its group members.
A Bamboo Airways website appeared online last month with ticket and promotional information, making it appear that the carrier had already obtained its license. The Ministry of Transport ordered
the site taken down, and Bamboo Airways denied involvement.
Foreign carriers, including Malaysia’s AirAsia and some Chinese LCCs, are also targeting Vietnam, where the market has grown more than 20% annually on the back of the country’s growing middle
class.

Nol van Fenema

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Source: Cargoforwarder

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