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Vietnam receives FAA Cat 1, but flight strategy yet to change
February 15th 2019
The U.S. Federal Aviation Administration (FAA) has granted Vietnam Category 1 status, which allows Vietnamese airlines to serve the U.S. with their own metal and also to codeshare. Read More » Vietnam Airlines has discussed needing 777X or A350-1000 equipment to fly non-stop, start-up Bamboo Airways has a commitment for 787-9s and low-cost leader, VietJet, has mooted services.
American Airlines has stated it would not fly to Southeast Asia. Delta is focused on its joint venture (JV) with Korean Air that operates three daily wide bodies to Ho Chi Minh. United Airlines exited Hong Kong-Ho Chi Minh in 2016 in favour of the Tokyo hub of JV partner, All Nippon Airways. No immediate non-stop launches are planned.
Vietnam Airlines appears resigned to a government mandate for service irrespective of commercial opportunity. The airline said in a statement quoted by Reuters that “for Vietnam Airlines, launching routes to the U.S. is our political responsibility as a national airline. Whether or not the route is commercially feasible depends quite a lot on technical issues and aircraft”.
The largest un-served trans-Pacific city-pair is Ho Chi Minh-Los Angeles. Both cities are in their respective country’s southern territory. Vietnam-U.S. traffic is concentrated out of Ho Chi Minh, making it the likely origin of non-stop flights, rather than Hanoi in the north, which would shave an hour off the flight.
The San Francisco Bay Area and Seattle have smaller but still large Vietnamese communities. They also are closer and less competitive than Los Angeles. Unsurprisingly, airlines suggest these three West Coast cities as possible destinations.
But even smart planning and a LCC cost base may not be sufficient to compete with pricing from a plethora of one-stop options through Northeast Asian and Middle Eastern hubs.
Incumbent sixth-freedom carriers should not be overly worried. US-Vietnam traffic is often their filler and seldom high-yielding. Additionally, the U.S.-Vietnam market still is emerging and can be stimulated, producing more new U.S.-Singapore, which has seen recent new non-stops, is more mature.
Regulatory and alliance matters permitting, Vietnam Airlines would be advised to put its code on the trans-Pacific flights of investor ANA, which offers high frequency to North America. It also covers a range of destinations, including smaller cities San Jose and Houston where there are sizeable Vietnamese communities but few trans-Pacific flights.
A one-stop option via Northeast Asia reduces risk and potentially aircraft needs, but introduces stopover costs and aero-political matters if fifth freedom rights are sought.
