The Tourism Advisory Board and the Private Economic Development Research Board have recently also proposed the government to lift the cap. The proposal is part of their efforts to prepare for open skies, liberalize air transport and boost airport infrastructure development.
Vietnam is forecast to be the world's fifth fastest-growing aviation market by 2035.
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The tourism sector targets 17-18 million foreign tourists and 82 million domestic visitors by 2020. However, the local civil aviation sector is underdeveloped due to difficulties with airspace, infrastructure, management mechanisms and aviation certification.
The number of local air carriers in Vietnam is modest, so passengers have limited choices when it comes to air travel. The country currently has three airlines: Vietnam Airlines, VietJet Air and Jetstar Pacific. Jetstar Pacific is owned by Vietnam Airlines, while its foreign investor Qantas Airways holds only a 30% stake in the airline.
Besides this, the air fares offered by local airlines are not competitive enough, making domestic flights more expensive than international flights covering the same distance and duration, according to the two boards.
The costs of tours to Vietnam are also higher than those to Thailand due to the uncompetitive air fares. Meanwhile, enterprises face challenges in offering air transport services.
With financial and management supports from foreign investors, local airlines expect to raise their competition while more local airlines are also forecast to set up thanks to the capital contribution from foreign investors.
More foreign inflows needed
Vietnam is one of the fastest growing aviation markets in the world, expanding by 17.4% in the last decade, which was driven by a rise in domestic and foreign travelers as well as the emergence of low-cost carriers.
Vietnam's aviation sector ranks the fifth amongst ASEAN countries. It last year served more than 94 million passengers including 13 million foreign passengers, an increase of 16% compared to 2016, more than double that of Asia.
The International Air Transport Association estimated that between now and 2020, passenger transportation is expected to rise by 16%, and from 2020 to 2030, by 8%. Cargo transportation will increase by around 18% until 2020, and 12% between 2020 and 2030. The growth will make Vietnam become the world's fifth fastest-growing aviation market by 2035.
Deputy Transport Minister Le Dinh Tho admitted that such huge potential is an opportunity for Vietnam's aviation industry to continue taking off but is also a considerable challenge.
This rapid growth has put a strain on the airport infrastructure for the past year and the government has started to invest in infrastructure but more needs to be done in terms of capital and investment regulations to achieve a sustainable growth.
To develop the country's aviation sector sustainably, the government has recently approved the revision of the national aviation transport development plan till 2020 with a vision to 2030, in which the Ministry of Transport estimated to need VND350.5 trillion (US$15.4 billion) to develop the sector by 2030, with VND84.4 trillion (US$ 3.7 billion) to be invested by 2020.
Under the plan, Vietnam's aviation sector will exploit 23 airports with an annual traffic of 144 million passengers by 2020 and 28 airports with an annual traffic of 308 million passengers by 2030. The number of aircraft will reach more than 220 units by 2020 and 400 units by 2030, increasing by 70-100 units compared to the previous plan.
