The Civil Aviation Authority of Vietnam (CAAV) has introduced a series of recommendations to both the Ministry of Transport and local airlines, warning of overcapacity if airlines do not keep track of their own fleet expansion.

The report was submitted as part of a proposal evaluation from a new startup, Kite Air.

Kite Air is a product of Thien Minh Aviation Joint Stock Company, part of conglomerate Thien Minh Group. Hoping to enter service by 1Q 2020, Kite Air has an ambitious start, targeting 15 ATR 72s and 15 Airbus A320/A321s by 2025.

However, CAAV questions the cost effectiveness of the ATR 72, and the new airline's ability to sustain 30 aircraft in such a short timeframe. Instead, CAAV recommended an initial fleet of 20-25.

With a capital startup of VND1 trillion, CAAV expects the airline to report a loss of VND350 billion during the first three years of operations and will not meet the country’s law of a minimum capital of VND1 trillion for a domestic and international airline startup with 30 aircraft.

CAAV said the country has seen exceptional growth as the local aviation market grew at a rate of 20.5% for passengers and 13.2% for cargo between 2014 and 2018. It added that by 2020 local airlines would carry more than 60 million passengers and nearly 96 million by 2025. 

Therefore, the regulator recommends Kite Air to focus of domestic routes with around 21 weekly flights from major hubs such as Da Nang, Ho Chi Minh, and 63 weekly flights from its hub at Chu Lai.

CAAV also added that establishing Kite Air could add pressure to overcrowded airports including Hanoi’s Noi Bai International Airport and Ho Chi Minh City’s Tan Son Nhat International Airport, and also suggesting the carrier to focus on network within central Vietnam.

Thien Minh Aviation is 30% owned by Thien Minh Group, one of Vietnam's biggest travel and hospitality groups, 60% by its chairman Tran Trong Kien, and 10% by Tran Hang Thu, the group’s financial director.

Chen Chuanren, chuanren@purplelightvisuals.com