Vietnam Airlines A350.jpg Vietnam Airlines

Vietnam Needs More MRO Capacity

The announced joint venture between Vietnam Airlines and ST Engineering will support the growing Vietnamese airlines.

Yesterday’s announcement about a component maintenance joint venture between ST Engineering and Vietnam Airlines was the latest indication of the rapid growth of air travel in Vietnam.

The two biggest airlines in the country are flag carrier Vietnam Airlines and low-cost operator Vietjet.

Following a top-up order in February, VietJet now has 200 Boeing 737 Max aircraft on order, while Vietnam Airlines is receiving 10 Airbus A321neos in the current quarter.

In its launch release, the joint venture mentioned the A320, A350, 787 and ATR families as aircraft it would support, although it is open to adding others.

Vientam Airlines was valued at $2.5 billion in its initial public offering in May, while already-listed Vietjet has a market capitalization of roughly $2.8 billion.

With such powerful players, plus the ongoing success of joint venture Jetstar Pacific, it seems likely that Vietnam will host more aftermarket development in the near future.

Thailand, Malaysia, Singapore and Indonesia have been more receptive to foreign investment on this front so far, and while facilities in those countries could also be used by Vietnamese carriers, the success of those airlines should be used as a springboard to grow aftermarket share.

Furthermore, the bureaucratic hurdles that foreign investors have encountered when trying to set up airlines in Vietnam are largely absent when doing the same for MRO businesses.

Indeed, the Vietnam’s aviation regulator is encouraging local companies to explore joint ventures and add to the country’s MRO capacity, which at present is largely limited to Vietnam Airlines Engineering (VAECO).

Vietnam’s ministry of transport plans to invest about $15 billion in its aviation sector until 2030.

TAGS: Airlines
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