Is VietJet trying to be the Emirates of the east?

Last week, VietJet started a new route to India which is its fifth destination in the country. The airline launched operations to Trichy – one of the rare airports in India where the international traffic is more than the domestic traffic. There are some markets which I keenly follow, for they are the ones which are either similar to India and help get an insight into what could happen next or its a game of chess where the battle is being played out with strategies which sometimes are poles apart. One such market is the India – Vietnam market.

VietJet started operations to Delhi and Mumbai, then announced flights to Bengaluru and Hyderabad – which never took off and pulled out flights from Da Nang and Phu Quoc. The Vietnamese side has exhausted its bilateral rights and VietJet is expanding to cities where it has open skies access as part of agreement with ASEAN. IndiGo – which became the first player to launch non-stop flights between India and Vietnam has restricted itself to just two markets and pushed its plans of expansion from Mumbai and Delhi, at least for now and the late entrant Vietnam Airlines which launched with the A350s quickly substituted it with narrow body aircraft, while VietJet substituted their narrow body with wide body aircraft. 

Doesn’t this make the routes interesting? To go back in time, Jet Airways was the first airline to connect India with Vietnam. The airline did so with a one stop flight via Bangkok. The flight did not last long. It was either too early or a one stop via Bangkok competed with every other one-stop and wasn’t attractive enough for passengers. 

A lot has changed since then. The India – Vietnam market has been growing rapidly on the back of increased cooperation in the field of science, defence and few other sectors and tourism remains a prime mover.

Flashback to new beginning

After two years of announcements, VietJet launched flights to Delhi in December 2019. It aimed to be the first and only airline to connect the two countries, when it first announced its flights. But IndiGo had taken that title! IndiGo launched flights to Vietnam in October 2019, two months ahead of VietJet. The two airlines came with two opposite strategies. VietJet – targeting the largest market while IndiGo offered the services from Kolkata, making it a short flight and feeding Kolkata from the multiple cities in India.

Post pandemic, VietJet was back but so was Vietnam Airlines. The 28 flights per week quota between the two countries was fully consumed from the Vietnam side with VietJet and Vietnam Airlines operating 14 flights each, both dividing the flights to Mumbai and Delhi from Hanoi and Ho Chi Minh City – an interesting mix. As if they coordinated the schedules, the mix of operations from the two Vietnamese carriers ensures that they have minimal overlap with each other on routes to India with distinct days of operations. 

The updation of Bilateral Air Services Agreement between India and Vietnam saw Chennai and Kolkata being replaced by Bengaluru and Hyderabad, but there were no rights left from the Vietnamese side. Instead, VietJet took advantage of the open skies points under the ASEAN – India cooperation to launch flights to Ahmedabad, Kochi and Trichy. The flights to India from Da Nang and Phu Quoc have been withdrawn, silently. 

Numbers don’t lie

Numbers for Q2-CY23 released by DGCA show that a total of 90,512 passengers flew non-stop from India to Vietnam and 90,687 passengers flew non-stop to India from Vietnam. This averages around 1000 passengers per day each way. 

Half of this direct traffic between India and Vietnam was carried by VietJet, while IndiGo carried 31% and Vietnam Airlines the rest 19%. Vietnam Airlines downgraded its planned A350 operations to India to narrowbody flights while VietJet upgraded some of its flights to a high density A330-300! 

Q2-CY23 Passenger Traffic (non-stop passengers only)

Where are Indian carriers?

IndiGo – which commenced connectivity between the two countries now seems marginalised with just two routes, those between Kolkata – Hanoi and Kolkata – Ho Chi Minh City.

Things could change in the near future, though. IndiGo may have wanted to start flights from Delhi and Mumbai, but for the aircraft challenges and heavy competition from VietJet. On the other hand, the expansion from the Indian side could come from Air India group.

Hanoi the new Hong Kong, Vietnam the new Dubai?

Hong Kong has been undergoing a lot of changes on the socio-political front. One of the casualties of this could be (if it already isn’t) Cathay Pacific – the local airline. Cathay has had a good run in India, operating to Delhi, Mumbai, Bengaluru, Kolkata and Chennai – along with its subsidiary Dragon Air, which has since merged with Cathay. 

Cathay hasn’t returned fully to India. Hanoi is just 900 kms west of Hong Kong with very little deviation in terms of flight route. Hanoi is well placed for connections to Korea, Philippines and Japan, while Ho Chi Minh city is well placed for connections to parts of Indonesia and Australia.

With a restriction on frequency and divided amongst two airlines, none of the Vietnamese carriers can match Emirates which has access to 50,000 seats each week. Even if the Vietnamese side deploys all widebodies across all routes, the deployment won’t cross 12,000 seats each week – a far cry from what Emirates has access to. Additionally, the traffic which transits via Dubai is that to North America and Europe and Vietnamese airlines will have to link a lot of American destinations non-stop if they want to aim for that transit traffic.

Network Thoughts

The impact of 50+ non-stop flights each week between India and Vietnam has been on Thai, Malaysian and Singaporean carriers who took this traffic in the past. This growth will be from the end of 2019 to mid 2023. 

Will one of the carriers jump the gun and partner? Will it be Air India – Vietnam Airlines or will it be one of the LCCs getting into such an arrangement. IndiGo’s partnerships have so far been with major FSCs and network carriers. 

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