The two sides of local aviation market

The local aviation market has exposed a true picture of two opposite sides this year when flagship carrier Vietnam Airlines is progressing smoothly while low-cost carriers, Jetstar Pacific and VietJet Air, are struggling with a host of difficulties.

The problem facing Jetstar Pacific and VietJet Air is not the weak travel air demand, as the Civil Aviation Administration of Vietnam (CAAV) says the country’s aviation is achieving double-digit growth. The headache, for them, relates to branding.

Deep in logo problems

The headache is tensioning for Jetstar Pacific when the clock is ticking down to September 15, the deadline set by CAAV for it to present a new logo to replace the Jetstar or Jet and orange star of Australia’s Jetstar Airways that the local carrier has been using since 2008.

The new logo is the compulsory condition for Jetstar Pacific whose controlling stake is still in the hand of State Capital Investment Corp. (SCIC) to get a new license from the Ministry of Transport as a substitute for its current license that will be invalid after the deadline.

After over 30 months of being licensed, VietJet Air has not announced a logo for its commercial activities, though AirAsia said in April after acquiring 30% of VietJet Air that the first licensed private airline in Vietnam would fly with a trade name of VietJet AirAsia.

However, CAAV has whistled the carrier for its VietJet AirAsia name and demanded VietJet Air be a genuine airline of Vietnam.

“We will not agree with VietJet Air’s plan to develop an airline that is similar to AirAsia with the only word VietJet being the difference,” says Lai Xuan Thanh, deputy director general of CAAV.

Thanh tells the Daily after AirAsia inked a strategic partnership with VietJet Air in Hanoi in April this year that the aviation body wants VietJet Air to have its own logo that identifies it as a Vietnamese airline, not an affiliate of AirAsia.

Designing a new logo takes VietJet Air more time, and delays the Hanoi-based carrier’s plan to begin services in August until October this year, or five months later than the schedule the airline proposed in its application submitted to CAAV after this agency warned of its license being revoked if it was unable to fly in December last year.

When VietJet Air will take off into the skies of Vietnam remains a question because logo design takes a lot of time and efforts. Experts say if CAAV allows the carrier to operate aircraft with the logo of AirAsia, it will be able to welcome passengers aboard its planes in August. Reality is different from plans.

Certainly, VietJet Air and AirAsia do not want to follow the branding suit of Jetstar Pacific and Jetstar Airways, as this will go to nowhere and what Jetstar Pacific is dealing with is a good lesson to learn.

Over one year after Jetstar Pacific had invested heavily on promoting and commercializing the Jetstar brand in Vietnam as part of a strategic partnership with Jetstar Airways, the Ministry of Transport told leaders of this local carrier to devise a new logo.

Jetstar Pacific has spent big bucks removing the billboards and signs with the logo of the Australia airline at airports, ticketing offices and agents in this market. Also, it will have to find nearly US$1 million for having its six aircraft re-painted with the new logo approved.

Jetstar Pacific is now paying for not adhering to CAAV’s warning of the Jetstar brand use in the domestic market before, and for what the carrier claimed legitimate in compliance with Vietnam’s regulations on intellectual property and the Intellectual Property Bureau’s relevant certificates.

High in the sky

While Jetstar Pacific and VietJet Air have their own problems to solve, Vietnam Airlines is building a firmer stance as a leader in the local aviation market and becoming a major player in Southeast Asia.

In the first half of this year, Vietnam Airlines opened four domestic routes, further stretching its wings over the Mekong Delta, the central and Central Highlands regions. On the international front, the airline launched direct flights to Japan’s Osaka, Myanmar’s Yangon and China’s Shanghai before its full membership of the global airline alliance SkyTeam on June 10.

Just last week, the state-run released its plan to fly between HCMC and Japan’s Nagoya from August 2010. This year, Vietnam Airlines is conducting over 290 daily flights on 75 routes to 20 domestic and 26 international destinations.

Pham Ngoc Minh, chief executive officer of Vietnam Airlines, says the national flag carrier will take delivery of some 10 aircraft this year to bring its modern aircraft fleet to 70, including Boeing 777, Airbus A330, A321 and 320s. The development plan envisages the airline to have 115 aircraft by 2015, a year that it aims to be one of the leading carriers in the region.

Obviously, fast expansion of Vietnam Airlines is a positive sign for the country’s aviation industry, but this also exerts more pressure on and fiercer competition for Jetstar Pacific and the startup carriers VietJet Air and Mekong Air.

VietJet Air have also learned much from the case of Indochina Airlines, the second private airline licensed in Vietnam that dared to take off in November 2008 when the world’s airline industry faced declining air travel. Indochina Airlines was grounded in losses in late October 2009 as it was unable to compete with Vietnam Airlines and Jetstar Pacific.

Vo Huy Cuong, director of CAAV’s Air Transport Department, says the transport ministry has not declared any final decision for Indochina Airlines, though its license should have been revoked as it has not had any air operator certificate two years after it was licensed as per the country’s aviation regulations.

Indochina Airlines seems to be sinking into oblivion alongside the disappearance of its website. Undoubtedly, the failure of this carrier is a sad beginning of a story about Vietnam’s private airline sector and signals an uneven runway on which VietJet Air is about to approach.

With heavy investment in flight network and aircraft fleet expansion, Vietnam Airlines is believed to be able to compete on par with other regional carriers. But, doubt has risen about the ability of Jetstar Pacific and VietJet Air.

The great concern is whether a real Vietnamese logo will guarantee Jetstar Pacific and VietJet Air to vie with other regional airlines by 2015 when the Association of Southeast Asian Nations expects to fully open skies to country-member airlines in order to spur trade and tourism in this bloc of 600 million people.

Tags: Vietnam aviation, Vietnam aviation industry, Vietnam aviation market