I found this to be a very interesting story, I hope you do too.
(Michael Carter ...APF Editor and Chief)
Vietnamese low-cost carrier VietJet Air used the Paris Air Show to restate its interest in launching a long-haul operation, but the carrier’s modest international footprint suggests that such a venture will not make sense for several years – if ever.
VietJet’s expression of interest in a long-haul model is nothing new. In early 2014, during a visit to Singapore, managing director Luu Duc Khanh said the carrier would make a decision about such a unit in 2015, citing the large Vietnamese communities in countries such as the United States.
One year later, when asked about the idea, he said a decision is only likely in the next three to five years. The carrier’s focus, he said, was taking advantage of further opportunities in the booming Vietnam domestic market.
Luu was not in Paris, but his boss, chief executive Nguyen Thi Phuong Thao, told journalists the carrier is “seriously considering” the idea of long-haul, low-cost. All good and well, but it is worth noting that she said the unit, if it ever emerges, would only occur in “several years,” seemingly an even greater backtrack from Luu’s comments a few months earlier.
Quite apart from the technical challenges a long-haul, widebody venture would entail for a small, point-to-point domestic carrier, VietJet has little experience in overseas markets. Moreover, it has little brand awareness in the region, let alone in far-flung international markets such as the United States, Europe, and Australia.
As of July 2015, it only serves four international destinations: Bangkok, Singapore, Taipei, and Hangzhou.
VietJet network, July 2015
The carrier has aggressively ramped up capacity on its routes to Bangkok from Ho Chi Minh City and Hanoi, operating twice to three times daily from Ho Chi Minh City and daily from Hanoi.
Its Bangkok-based Thai VietJet unit, however, has failed to gain any traction whatsoever. It remains a minor charter operator with a single Airbus A320 aircraft. This despite VietJet’s comments throughout 2014 that the carrier would open for business with both domestic and international routes.
On the competitive Ho Chi Minh City-Singapore sector, in capacity terms as measured by seats VietJet places fifth among the five carriers serving the route. Here it contends with Vietnam Airlines, Singapore Airlines, Tigerair, and Jetstar Pacific. Data from Innovata’s schedules service shows that the Vietnamese low cost carrier veers between daily and twice daily A320 services.
Similarly, VietJet is the fourth of four players on the Ho Chi Minh City-Taipei route, well behind incumbents China Airlines, EVA Air, and Vietnam Airlines. Innovata indicates that Taipei could be discontinued by October, to be replaced by a daily Seoul service in November, where VietJet will be a distant fourth after Korean Air, Asiana, and Vietnam Airlines.
Meanwhile, the carrier’s executives are fond of talking about acquiring a new aircraft type, possibly a regional jet or a turboprop, while continuing to take on new A320s. Flightglobal’s Ascend Fleets database shows that the carrier has 23 A320 family aircraft now, with 63 on order. It is due to receive six more by the end of 2015, nine in 2016, and nine in 2017, before taking break in 2018, when it will take just one jet, its first A320neo.
VietJet capacity by route, July 2015
Although VietJet is doubtless the target of sales pitches from the widebody manufacturers, it would do well to learn from the experiences of other low-cost carriers who have made the ambitious step of entering long-haul, low-cost.
AirAsia X continues to struggle, while Cebu Pacific appears less than delighted with performance at its long-haul unit. Cebu’s rationale for its long-haul offering, the Filipino diaspora, is identical to that of VietJet. Launched in 2013, the unit mainly focuses on flying high-density A330-300s to the Middle East. In 2014 it posted a load factor of just 61%, a number which Cebu hopes to push to still-unimpressive 70% in 2014.
Singapore Airlines has never disclosed Scoot’s financial performance, but corporate regulatory filings show that the carrier accumulated losses of over S$76 million ($60.8 million) between its launch in June 2012 and the end of fiscal 2013. This is despite its parent’s vast experience running a hub-and-spoke network carrier.
Long-haul, low-cost looks great on paper, but if VietJet must be careful about biting off more than it can chew.
(Greg Waldron - Flightglobal News)