Vietnam firm reluctant to launch cargo flights, foreign carrier eager

In late October, IPP Air Cargo canceled its application to launch what would have been the nation’s first cargo airline. However, the company had already completed the procedures to lease four Boeing Converted Freighters 737 800BCF.

Jonathan Hanh Nguyen, chairman of the airline’s parent company Imex Pan Pacific Group (IPPG), said that global air cargo demand was declining due to current turmoil.

“We have decided to end our plan to avoid causing more damage to carriers that are already incurring losses,” he said, adding that the company aimed to reinstate the plan when the market stabilizes.

Last month, Lufthansa launched its first direct flight from Frankfurt to Hanoi.

The carrier had previously run two weekly flights from Germany to HCMC before diverting operations to Thailand.

CCO Ashwin Bhat said his airline could not ignore the Vietnamese market, where 30% of exported items are electronics and high-tech goods.

Vietnam’s plentiful bilateral trade agreements with major markets, especially Europe, were attractive to Luftnasa, said Bhat.

He added that the country’s rapid economic recovery from the Covid-19 pandemic had also interested the dominant European airline.

According to government statistics, the total volume of goods transported by air in Vietnam has increased 2.5 times over the last ten years. The number is forecasted to surge to 4.1 million tons by 2030.

According to the Vietnam Logistics Business Association (VLA), Vietnamese airlines hold an international freight forwarding market share of only 12%, while nearly 30 foreign carriers hold the rest.

VLA president Le Duy Hiep said the withdrawal of IPP Air Cargo from the market was a pity because domestic logistics enterprises are in dire need of Vietnamese cargo airlines.

According to Hiep, Vietnam’s massive amount of total imports and exports were worth over $700 billion in 2022, with over half being exports. Over two million tons of goods are exported by air from Vietnam each year.

Analysts have said that these factors have made the potential of the Vietnamese cargo market plain to see for Lufthansa Cargo.

Hiep said Vietnam should be home to cargo airlines with larger market shares, but noted that this would require much more investment and a wider network of agents and customers.