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Which direction to develop the aviation logistics market?

14:39 | 07/10/2022

VCN - The air freight logistics market in Vietnam is quite large and full of potential, but the market share of Vietnamese enterprises is still too small, leading to high costs.

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Customs officers of Tan Son Nhat airport supervise imported goods.
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The market share is too small

Due to high transportation costs, in Vietnam, the main products used by air transport are phones, tablets, electronic goods, cosmetics, textiles and some agricultural products such as seafood, flowers and fruits. Aviation accounts for only a small part of the total volume of goods transported in Vietnam, but accounts for 25% of the total export value of the country.

The volume of import and export goods by air is increasing every year. According to the Ministry of Industry and Trade, Vietnam has five airlines that are exploiting combined cargo transportation on passenger flights, but there is no airline that carries goods by specialized aircraft. The international cargo market of Vietnamese airlines currently has 29 foreign airlines operating and transporting goods from 16 countries and territories to Vietnam, the international cargo market share of Vietnamese airlines. in the 2020 – 2021 period only accounts for about 11% of the total market share of international goods.

With a small market share, mainly dependent on international airlines, businesses transporting goods by road do not have to bear high fees, especially in times of fluctuating socio-economic situations, such the recent Covid-19 pandemic. According to the Ministry of Transport, due to the sharp decrease in the number of flights carrying passengers and goods, while the demand for transportation has increased, international freight rates have skyrocketed by 3-4 times. Even at one point, the freight rate increased 5-6 times compared to before the Covid-19 pandemic.

According to Johnathan Hanh Nguyen, Chairman of Inter-Pacific Group, Vietnam's air freight market has a growth rate of 15.3% per year, but so far, airlines still only carry goods in combination on passenger flights, there is no airline that transports goods by specialized aircraft. Previously, the freight rate for freight from Asia to the United States was about 1-1.8 USD/kg, but at one point it increased to 17-18 USD/kg. With an increase of up to 10 times like that, businesses can't cope. When logistics costs account for 20-25%, it erodes the profits of exporters.

“When we saw a galloping increase in freight rates, there was a 5-fold increase (according to Drewry Shipping's data) at the peak of the pandemic. As for air freight, we had to pay 3 times more freight for goods going from Europe to Vietnam. The higher the demand for transport, the higher the freight rates, while 88% of the market share of air freight is held by foreign airlines. Foreign carriers are controlling prices because they are almost alone in the market, with no competition. If I don't do it, the demand for transporting goods by air will still be congested, price instability will make it difficult for domestic import-export enterprises," said IPP Air Cargo, which belongs to IPP Air Cargo Joint Stock Company.

Need a Vietnamese airline to transport goods

The determination of the above-mentioned overseas Vietnamese businessman has received the consensus of many ministries. Recently, the Government Office issued Official Letter No. 4778/VPCP-CN to consult the Ministries on the granting of Air Transport Business License to IPP Air Cargo Joint Stock Company to have enough grounds to submit to the Prime Minister to consider and decide.

Up to now, there have been many ministries and branches agreeing and saying that licensing the establishment of a Vietnamese airline specializing in cargo transportation is necessary.

According to the Ministry of Industry and Trade, with the current world trend of developing a global supply chain, along with the context that Vietnam has signed and implemented many free trade agreements, including the target market in developed countries with segments of goods that need to be transported in a short time, with high seasonality, the fact that our country has a cargo airline invested by domestic investors will contribute to improving the competitiveness of Vietnam's air logistics, helping to expand the market for Vietnamese exporters.

In the document of the Ministry of Defense sent to the Government Office, the leader of the Ministry of Defense said that the license for IPP Air Cargo Joint Stock Company to perform freight transport services, contributes to promoting the development of the Vietnam Logistics industry, in line with the overall development goals and general strategy of developing transportation services to 2020, vision to 2030. The Ministry of Defense has agreed to license the IPP Air Cargo Joint Stock Company to provide air transportation services, especially when the aviation market recovers after the Covid-19 pandemic.

The Ministry of Transport believes that the birth of IPP Air Cargo will bring specialized and quality freight services to customers, contributing to promoting the development of Vietnam's logistics industry, in line with the overall development goals.

Currently, airlines only focus on bringing goods to Noi Bai and Tan Son Nhat airports, so their goods are concentrated at these two ends. The introduction of IPP Air Cargo will create a breakthrough in logistics by bringing goods from abroad into Vietnam, and foreign airlines bring goods in, IPP Air Cargo will deliver to all 22 airports of Vietnam. Next, Viettel Post, Vietnam Post, and Sasco are strategic partners with the support of logistics companies to bring their goods to all provinces and cities.

Expo seeks opportunities for post-pandemic aviation growth Expo seeks opportunities for post-pandemic aviation growth

The establishment of an airline specializing in air transport is a good sign for Vietnam's logistics industry to gradually regain the domestic air transport market share that has long been held and dominated by foreign airlines.

By Le Thu/ Huu Tuc