Regulatory Barriers and Financial Woes: Challenges Facing Vietnam’s Airline Industry

The airline industry in Vietnam faces numerous challenges that have made it difficult for foreign airlines to enter the market. At a recent conference, the Tourism Advisory Board proposed solutions to address these issues, including the establishment of new airlines. However, current regulations present barriers to foreign market participation.

The law stipulates that foreign-invested airlines can operate only if their capital share is limited to 34% and under certain conditions. This limits the ability of foreign airlines to enter the market directly. Despite opportunities to partner with existing Vietnamese airlines, foreign companies have faced challenges in establishing a presence in the industry due to regulatory constraints.

Industry experts highlighted the difficulties of doing business in the aviation sector. Business leaders emphasized the profitability challenges in the industry, with high entry costs and limited prospects for returns on domestic flights. This has deterred potential foreign investors from entering the market, despite there being opportunities for growth in Vietnam’s tourism sector.

Even domestic investors have faced challenges in the aviation sector, with many airlines struggling to turn a profit due to financial problems. Recent developments in the market have shown how both Vietnamese and foreign investors are facing difficulties in navigating regulatory and financial constraints. Some companies have even withdrawn from the market due to these issues.

In addition, regulations that limit foreign capital contributions in domestic airlines are considered unattractive by industry stakeholders such as Bamboo Airways, which has called for an increase of up to 49% cap on foreign capital contributions to allow for greater strategic decision-making and operational control.

Given these challenges, industry leaders are calling for government support to help airlines overcome difficulties and ensure sustainable development through policies such as reducing environmental taxes on aviation fuel and international route fees, take-off/landing fees, and interest rates for airlines.

Overall, Vietnam’s airline market is struggling with regulatory challenges, financial constraints and profitability issues that have hampered progress for both domestic and foreign airlines alike. Industry stakeholders are advocating for policy interventions that support growth while addressing concerns about sustainability and competitiveness within this vital sector.