Vinpearl Air, a proposed Vietnamese airline set to launch in summer 2020, is being scrapped. Its would-be owner, Vingroup JSC, plans instead to focus on technology and manufacturing businesses, including developing electric vehicles (EVs).
Plans for Vinpearl Air were announced last year. In Aug. 2019, Vingroup said the carrier had been approved to launch operations; it planned to start flying during this year’s summer season.
“The aviation market of Vietnam has a lot of potential and is developing strongly, but it also has large companies already in operation,” Nguyen Viet Quang, Vingroup Vice Chairman, said in a statement after announcing Vinpearl’s demise. “Vingroup’s strong investment in aviation could lead to an oversupply.”
“We also need to focus our resources on developing our technology and industry segments,” Quang continued. “So we decided to withdraw from the aviation industry.”
The airline would have launched out of Hanoi’s Noi Boi International Airport. Vingroup had plans to grow Vinpearl Air to as many as 30 aircraft by 2024, and it would have flown both domestic and international routes.
Five airlines currently operate in Vietnam, including Vietnam Airlines, VietJet Air, Jetstar Pacific Airlines, Vietnam Air Services and the recently-launched Bamboo Airways. While Vietnam’s air market is certainly growing – 116 million passengers flew in Vietnam in 2019, a 12 percent increase over 2018 – analysts suggest that the market is nearly saturated, pointing to increasingly-problematic bottlenecks at airports.
Noi Bai International Airport and Tan Son Nhat International Airport, in Ho Chi Minh City, are Vietnam’s major international airports, and they both handled more passengers than capacity in 2018; Noi Bai welcomed 38.5 million passengers, 10 million over capacity, while Tan Son Nhat processed 26.1 million, about 1 million above its 25-million-passenger capacity.
Handling too many passengers leaves airports overcrowded, understaffed, and under-maintained. If investments are not made to improve airports, or even build new ones, airports could come to a standstill as they fail to keep up with passenger demand. While large airports feel the weight of cramped passengers, connecting through or visiting Vietnam’s biggest cities, smaller airports could find themselves unable to support even slight increases in passenger traffic with extra staff or infrastructure.
Despite Vinpearl’s scrapping, Vietnam has seen a new airline launch in the past year. Bamboo Airways launched in early 2019, and it has plans to grow to 100 planes by 2024. The airline currently flies predominantly domestic routes, though it has plans to expand across East Asia, Europe and the U.S.
Now, Vingroup seems to be all-in on the EV business. Its chairman is investing his own capital to export EV technology around the world by 2021, and Vingroup is divesting stakes in other units to fund its EV project. Meanwhile, the company also created VinSmart as an attempt to enter the smartphone market.
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