VietJetAir prepared for competition

15:12' 02/05/2008 (GMT+7)
The country's third air carrier VietJet Aviation Joint Stock Co. (VietJetAir) is cooperating with PARC Aviation in recruiting senior executives to prepare for its operations in Vietnam. Robert Hughes, managing director of VietJetAir, talks with the Daily how the first private airline in Vietnam has readied itself for the take-off scheduled for late this year. Excerpts follow:
Could you elaborate on the agreement with PARC Aviation and what the Dublin firm can help with employment?
PARC Aviation will provide qualified pilots and officers who have the appropriate licenses and type ratings for the planes hat we will fly. The firm will also help us search for other specialists in aviation including managers with experience in other airline functions such as revenue and yield management. We have already consulted with PARC Aviation in building our business plan.
It is not easy to hire qualified aviation staff at the moment. How could VietJetAir do that only months ahead of the departure?

We have already sourced several qualified staff for our operations, and will train others to fill the short-term demand. For the longer term we will finalize agreements with training institutes for engineers. In addition, we are planning a pilot training scheme to train our own pilots. This is not a short-term easy solution; it will take many years to develop a team of qualified pilots and engineers.

Has VietJetAir signed any contract for aircraft lease or purchase, and how many aircraft does the company plan to have in the initial period of operations?

We are still in negotiations on aircraft, so I cannot divulge any details until the final agreement. Our negotiations involve up to 10 aircraft introduced into the fleet in the first two years while routes and operations are fine-tuned. Given the current economic instability in the global aviation market, we are being conservative, yet taking advantage of opportunities to secure capacity in the market. We will initially lease aircraft, but purchase them as soon as possible to reduce overall costs. Our planes will have approximately 130 economy class seats, and 12 premium-economy seats.

We will only have one type of aircraft, either Boeing 737s or Airbus 320s. We are focused on short-haul operations, between one and five hours, so we do not need a mixed fleet. This will help us control costs since we will only need one type of pilots, only one type of engineers, only one set of spare parts, etc. We expect to begin with two or three planes; add two or three more planes shortly thereafter, and add an additional five in the following year.

Will VietJetAir follow the standards of a low-cost carrier or a full-serviced airline?

Several low-cost carriers have learned that there is demand for a premium economy and have adjusted their offerings for the customer demand. For example, in Asia we have seen Nok Air add a premium economy class; in Australia Virgin Blue has also added a premium economy class; and in the U.S. JetBlue has many features not available in low-cost carriers. We believe there is a market for such an offering and will be fine-tuning our product for the market based on customer demand. Our fares will be competitive, since we will maintain a lean cost structure.

So, when will people be able to book fares for VietJetAir flights?

We will set our fares few months prior to departure, and will allow booking of flights at that time. Since we will initially fly domestically, the international fares will wait for another year or so.

It is said that several low-cost carriers are on the brink of bankruptcy due to soaring fuel prices. Does this problem affect or cause any delay in the take-off schedule of VietJetAir?

We still plan to depart in December 2008. The airline industry is in turmoil because of the fuel prices. The industry must raise fares to stay profitable and we believe this will reduce demand for air traffic somewhat, but we believe there will still be strong demand despite the higher fuel prices and fares. We expect that there will be some stability in the fuel price by the time we commence operations, and we will be able to set our fares at that. We are working to keep all other costs under control so we can keep fares competitive.

Do you think that licensing VietJetAir is an important mark in the opening of Vietnam's aviation industry to private investors?

Yes, this will allow increased mobilization of capital into an important sector of the economy. As the transportation infrastructure and offerings expand, this has indirect benefits to other sectors. Opening up sectors of the economy benefits consumers and service providers.

Vietnam is developing in many ways, with business expanding and tourism increasing. Both of these factors lead to increased demand in air travel. And with the tourism infrastructure that is being developed throughout the country, we see great opportunity for increased air traffic in the future. The challenge will be that other airlines see the same potential. This is the reality of business, and we are prepared to compete.

Vietnam's aviation sector is moving in the same direction that other countries have moved, but in Vietnam's own timeline. Neighboring countries that have opened up the industry have seen benefits from the increased air traffic. We expect the same benefits here in Vietnam.