Why cargo, why now?
“I was really determined when I saw a galloping increase in freight rates, with a 5-fold increase (according to Drewry Shipping’s data) at the peak of the epidemic. As for air freight, we had
to pay 3 times more freight for goods going from Europe to Vietnam. Foreign carriers are controlling prices because they are almost alone in the market, with no one competing. If I don’t [launch
the airline], the demand for air freight will still be congested, and price instability will make it difficult for domestic import and export enterprises.”

Vietnam’s air cargo transport accounts for just 0.23% of the total transport volume, yet makes up 25% of the country’s total export value due to the high value of goods. Of note here, is that
IPPG occupies 70% of the country’s luxury market, dealing in popular international brands such as Nike, Rolex, Cartier, Armani, and Calvin Klein, to name but a few, so an own cargo airline would
certainly bring benefits.

Air and ground services – all from one source
Nguyen has plans beyond the airline, too, given that the country has 16 domestic airports, and yet foreign carriers only operate into two of them. IPP Air Cargo can therefore build a strong
domestic distribution network which will also cater as connections to foreign cargo carriers, connecting to state-of-the-art warehouses at the airports, including efficient, digital customs
procedures. “We are planning to build 5 logistics warehouses at Tan Son Nhat, Noi Bai, Cam Ranh, Da Nang, Can Tho, and later Long Thanh airports to bring goods from abroad to gather at these
hubs. After that, IPP Air Cargo will use cargo aircraft, covering 16 other domestic airports. The IPP Air Cargo project has an investment of 100 million USD, but investing in 6 hubs and 16
warehouses costs many times more. We do not simply build warehouses and counters like before, but must have conveyor belts, a modern intelligent management system like foreign countries.”

Logistics costs in Vietnam, which currently ranks eighth among the top 10 emerging logistics markets globally, account for more than 20% of its GDP (the global average is 11%), so more domestic
control should help to reduce costs here, too.

The time is ripe!
“IPP Air Cargo has been ready for 6 months now. It is expected that after 3 months from the date of issuance of the flight license, the airline will carry out domestic cargo flights and then
international flights,” he predicts, also pointing to the overflow of pilots on the market currently due to the pandemic.

The application for a business license has already been filed with the Civil Aviation Authority of Vietnam (CAAV), and IPP Air Cargo hopes to receive this by the third quarter of 2021.

The idea for a cargo airline also came from the former Prime Minister, Nguyen Xuan Phuc, in SEP20: he ordered the Ministry of Transport (MoT) to research the possibility of establishing a cargo
airline to help distribute agriculture and electronic goods. Yet the MoT, in consideration of the pandemic and the effects this is having on the existing airlines for which recovery is not
expected until at least next year, advised the Government to support their return and to not consider any new airlines until 2022.

Cargo competition due to Covid?
IPP Air Cargo will be the second attempt at establishing a cargo airline for Vietnam. In 2008, Trai Thien Air Cargo had received a permit for domestic and international cargo transport, yet given
it remained inactive for three years, and the permit was therefore canceled in 2011.

Of the 6 Vietnamese passenger airlines, Vietnam Airlines and Vietjet dominate the market, making up 75% of its share. Like many other passenger airlines, these two turned to cargo-only passenger
flights last year. Vietnam Airlines deployed 12 B787 and A350 aircraft with their seats removed, and transported 196,000 tons in 2020, a staggering 54.3% increase on 2019. It has been considering
investing in freighters since a while. Vietjet managed 60,000 tons of cargo in 2020, which translated into a 75% year-on-year increase.

Both the potential and the demand is there – in the air as well as on the ground. Nguyen is clear: “This air freight industry is also very dangerous, not simply because the market competes
with each other. Before IPP Air Cargo, there were also some names that rekindled their intentions, but then had to give up, when the market was not ready at that time. Newcomers will lose big and
if cargo were easy, domestic airlines would have done it. I will find a way to fight the giants. I also believe that the market will become more open and competitive.”

Brigitte Gledhill

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