Một số đề xuất chiến lược phát triển hãng hàng không vietnam airline

LUẬN VĂN THẠC SĨ
Một số đề xuất chiến lược phát triển hãng Hàng không Vietnam Airline

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CONTENTS
Page
INTRODUCTION

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CHAPTER I – THEORETICAL BASIS
1. CONCEPTS
1.1. Strategy in Business - Business strategy
1.2. The role of business strategy
1.2.1. The role in planning
1.2.2. The role in prediction
1.2.3. The role in control
1.3. The types of business strategy
1.3.1. Strategic business combination
1.3.2. Overall business strategy
1.3.3. Other business strategy
2. THE FOUNDATION FOR BUSINESS STRATEGIES
2.1. Analysis and evaluation of external environment
2.1.1. Macro environment
2.1.2. Micro environment
2.2. Analysis and evaluation of internal environment
2.2.1. Human resources
2.2.2. Financial capability
2.2.3. The work of production and operations

2.2.4. Marketing activity
2.2.5. Operation management
2.3. Method of strategy analysis
2.3.1. SWOT matrix
2.3.2. IE matrix

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CHAPTER II – THE SITUATION OF VIETNAM AIRLINES
1. BRIEF INTRODUCTION OF VIETNAM AIRLINES
2. MACRO ENVIRONMENTAL IMPACTS AFFECTING VIETNAM
AIRLINES ACTIVITIES
2.1. 2001-2010 Period
2.1.1. Economic, politic, and social
2.1.2. Legal Environment
2.1.3. Aviation Infrastructure
2.1.4. Tourism Infrastructure
2.2. 2011-2020 period
2.2.1. Economic, politic, and social
2.2.2. Legal Environment
2.2.3. Aviation Infrastructure
2.2.4. Tourism Infrastructure
3. MICRO ENVIRONMENT
3.1. Vietnam aviation market
3.1.1. Passenger markets

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3.1.2. Cargo markets
3.2. The aviation industry environment
3.2.1. National airport development orientation
3.2.2. Airlines’ development orientation in Vietnam
3.2.3. Joint ventures with Laos, Cambodia, Myanmar airlines
3.3. Competitions and Strategies
3.3.1. Domestic Markets
3.3.2. International Markets
3.4. Vietnam Airlines financial reports
4. EXTERNAL AND INTERNAL ENVIRONMENT ASSESSMENT

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CHAPTER III – VIETNAM AIRLINES’ DEVELOPING STRATEGIES
1. RESTRICTIONS AND WEAKNESSES
1.1. Delay in the equitization process and business renewal
1.2. Lack of uniformity in developing IT solutions and application
1.3. Developing quality services
1.4. Organization and human resource development
2. SWOT ANALYSIS
3. DEFINING VIETNAM AIRLINES STRATEGIES AND SUGGESTED
SOLLUTIONS
3.1. Network expansion strategy (product diversification)
3.2. Fleet development strategy
3.3. Organization re-structure and human resource training
3.4. Service quality development strategy
3.5. Brand development strategy
3.6. Alliance and cooperation strategy

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CONCLUSION

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INTRODUCTION
Air transport sector in Vietnam from its inception has become an important
component of the national economy, and become one of the key economic sectors
representing the first mode of transport progress and modernity. The growth of its
increasingly large role and have an important influence in the work of economic
development - cultural - social security and national defence . The trend of
economic globalization and the trend of internationalization of economic life has
pulled the growing trend of globalization in air transport development. It is
confirmed that air transport, especially international air transport, is also an
important link of the global transport.
VIETNAM AIRLINES CORPORATION (Vietnam Airlines) as a core unit, the
force of the air transportation industry in Vietnam, since its founding in 1956 until
now has not stopped developing, expanded and improved services to become an
airline of international standard.
Looking back 10 years (2001-2010), though many events have great influence as
the terrorist attacks in the USA dated 11/09/2001, SARS in 2003, avian influenza
from 2004 to 2005, economic crisis from 2008 -2009, Vietnam Airlines has always
in the right direction, overcome difficulties and flexible, and fast and strong
development both in width and depth to rise up from a lack of airline experience,

small scale, unknown, it has an airline average size of the area, dynamic, effective,
active participation in the trend in the image and quality of service is recognized .
Vietnam Airlines' fleet now has 70 aircraft; domestic route network of 20 points, 35
routes, international route network includes 26 points, 40 routes to 15 countries.
Transport capacity of VIETNAM AIRLINES reach 12 million passengers per year.
Ticketing system for Vietnam Airlines has grown to 43 countries. VIETNAM
AIRLINES owns an advanced labour force, devoted to their careers. The number of
Vietnamese pilots are 372 people, aircraft technicians who help VIETNAM

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AIRLINES 1269 initiative in mining operations, aircraft maintenance. VIETNAM
AIRLINES has partnered with 80 airlines around the world are members of the
Association of World Aviation (IATA) and SkyTeam. global airline alliance
Looking to the future, period of 2011-2020 is considered the strategic period,
opportunities for innovative development of the aviation industry in Vietnam.
According to the evaluation of the economic organizations (IMF, WB, ADB ...),
airlines (IATA, ICAO) in the world, Vietnam is located in the dynamic growth
potential of the world's most economic and aviation market. Besides, this is a
turning point in the stage of development of production technology of the aircraft
manufacturer with the introduction of the new generation aircraft such as B787,
A350, MRJ, Bombadier CSeries ... with the preeminent features on amenities and
passenger services, using advanced materials, efficient fuel saving, environmentally
friendly ... make opportunities for the young airline policy implementation, " the
capture of opportunities” to raise competitiveness. Under the plan, the period of
2010-2020 as well as deployment time and a complete range of development
categories of aviation infrastructure in Vietnam with the launch of the Long Thanh
International Airport, the services capacity reached 80-100 million passengers per
year (reaching world-scale), Noi Bai International Airport, Tan Son Nhat with their

capacity reached up to 50 million passengers per year (at regional scale), a series of
local airport upgraded ... After the open sky agreement of CLMV sub-region
(including Cambodia, Laos, Myanmar and Vietnam) is effective in April 2007, with
the success of cooperation projects between Vietnam and Cambodia, established the
national airline of Air Angkor Cambodia Cambodia (K6), together with efforts to
negotiate actively to develop a similar model of cooperation in Laos and Myanmar,
the coming years will be the time for comprehensive cooperation, mutual
development of the national airline of CLMV sub-region, and Vietnam plays a key
role, is the gateway of the sub-region.
Therefore, the organization for development and implementation for development
strategy of VIETNAM AIRLINES to 2020 must be sync from market development

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strategies, route network, aircraft resources to strategic human resource development,
branding, capacity sales, services, capital and operating mining policy, safety and
security... is essential to develop VIETNAM AIRLINES consistent with the trend of
movement of business environment, the aviation market, to capture opportunities in
the future, thereby elevation of Vietnam Airlines became the large airlines in the
Asia-Pacific, with prestige, image are confirmed on the global scale, plays a key role
in the operation of air transport of CLMV sub region, to contribute effectively to
economic development - politics – society of Vietnam.
On research methods:
Using direct study methods: Collecting information from newspapers, magazines,
the Internet, and other statistics from the documents have been published, the
financial statements, balance sheet and reports of business report in 2008, 2009 and
early 2010, the rules and regulations of Vietnam Airlines
Also using the group of analysis method, summary, comparative approach to
analyze the business activities of the Company.

Structure of topics:
On the basis of the program suggests, the group structure of the topics include:
Introduction
Chapter I: THEORETICAL BASIS
Chapter II: ANALYSIS OF CURRENT SITUATION
Chapter III: STRATEGIES FOR DEVELOPMENT OF VIETNAM AIRLINES
AND RECOMMENDATIONS
Conclusion

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CHAPTER I –THEORETICAL BASIS
1. CONCEPTS
1.1.

‘Strategy’ in business – Business strategy

The concept Strategy existed from ancient Greece. This term was originally derived
from military. Later it developed into science and art of military command. But
from the '60s (XX century) strategy applied to business and from which "business
strategy" was born. There are many different definitions of strategy and each is very
different depending on the concept of each author . We would like to point out here
the concepts of strategy suit to the subject and scope, the object of the research
group: "Strategy is the direction and scope of an organization in long term to gain
competitive advantage for organizations through the format of its resources in a
changing environment, to meet market demands and satisfy the expectations of the
concerned parties "(Johnson, G., Scholes, K. (1999). Exploring Corporate Strategy,
5th Edition Prentice Hall Europe).
Under the traditional approach, the strategy is the determination of the basic longterm goals of the enterprise, and the implementation of action plans to allocate

resources, to achieve the objectives of the business identified . Can also define the
business strategy as follows: Business strategy: "As a series of commitments that a
company uses to gain a competitive advantage by exploiting core competencies in
certain markets”. It may be said that business strategy is the way that businesses
use to guide the future to achieve and sustain its development.
The nature of the business strategy is to outline the future image of regional
business activity and the ability to exploit.
Business strategies used by 3 basic meanings are:
-

Identify long-term goals of the business.

-

Give the general action plan.

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Select the action plans, employ the allocation of resources to implement those
goals.

1.2.

The role of business strategy

1.2.1. The role in planning
Business strategy will help businesses identify their purpose in the direction of the

future-oriented activities in the long term, is a solid basis for the implementation of
the operation, help Administrator know, review and direct for their organization in
right direction, by any method, and any time to achieve results.
1.2.2. The role in prediction
In the trend of globalization, the business environment is always fluctuating.
Therefore the environmental analysis and development of business strategies will
help business managers are aware of opportunities, and risks occur at the same time
aware of the strengths and weaknesses in their business. Since then analyze and
predict the environmental conditions in the future, to make appropriate strategies to
take advantage of opportunities, strengths, reduce the risks, weaknesses to
overcome any business challenges.
1.2.3. The role in control
Business strategies can help Managers use and allocate the resources appropriately,
make appropriate decisions for each condition of the business environment, increase
the links between employee, strengthen capacity to prevent and stop the risk
occurring, avoid the financial risks. Improve the efficiency of production of
enterprises, so that enterprises can develop to sustainable stability.
1.3.

The types of business strategy

1.3.1. Strategic business combination

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This strategy is outlined based on the analysis of the environment inside and outside
so that the enterprise can see clearly its strengths, weaknesses, opportunities,
challenges and strategies that will be combined as follows:
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Take advantage of strengths to exploit opportunities in business (SO);

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Take advantage of the strengths is to limit the risk in trading (ST);

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Take advantage of opportunities to overcome weaknesses (OW);

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Minimize weaknesses to limit risks (WT).

1.3.2. Overall business strategy
Strategy refers to the most important issues with significant long-term meaning and
decisions of vital issues of the business, including 4 categories:
-

Strategies focus on the key issue, not spread resources, focus on those activities
is crucial for business;

-

The strategy is based on analysis of the comparative advantage of the business
with other businesses to find their comparative advantages to develop business;

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Creative strategy, exploration for new products and services;

-

Strategies to explore the possibility of the environment is to find the key factors.

1.3.3. Other business strategies
-

Business strategy is on the front, rear, horizontal, vertical;

-

Penetration strategy and market development, product development;

-

The diversification strategy;

-

The strategy for risks prevention.

2. THE FOUNDATION FOR BUSINESS STRATEGIES

The identification of business goals is the important beginning stage. It requires that
businesses must identify the tasks and objectives pursued by enterprises in their

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business. At the same time, business processes must clearly indicate the validity and
ethics of business to society.
When identifying the tasks and objectives, and business areas of the business, it is
necessary to analyze the factors affecting the group, as the basis for the
development of business strategy.
2.1.

Analysis and evaluation of external environment

2.1.1. Macro environment - economic environment, politics, society
Macro environment includes factors of economic environment, political
environment, social and cultural environment, lawful environment, environmental
technology, natural environment, global environmental impact images effect on the
survival and development of the business.
a. Economic environment (economic factors)
The main factors affect the operation of enterprises in the economic environment
are: The growth speed of the economy, interest rates, exchange rates and inflation
rates. Economic growth or recession has great influence to the enterprise, if the
economy have higher growth will create many opportunities for businesses to
expand operations, whereas if the economy economic downturn will lead consumers
to reduce costs and increase the risk for businesses. The interest rate will determine
the demand of business... policy on exchange rates, inflation also creates an
opportunity or increases risks to the enterprise.
b. Lawful environment and politics (elements on law and politics)
Lawful environment and politics may impact significantly on the business can also
create opportunities and vice versa can also create risks for the enterprise.
This environment includes: political stability, the policy of the legal system (ie
investment law, labour law, environmental law resources .. tax policies, fees,
regulations on advertising reports ...) ...

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c. Socio-cultural environment (cultural, social factors).
These factors include the following elements: lifestyle, ethics, traditions, consumer
attitudes, the role of women, population growth, population shifts, the marriage rate,
birth rate birth, educational level, the establishment of associations to protect
consumers ... These factors create opportunities or threats for enterprises.
d. Technological factors.
Technological changes may alter production methods, products ’ life cycles, changes
in technology and their products with better quality, cheaper costs. This is an factor
affects largely and directly to the business strategy of the enterprises. So in the
process of building the business strategy of the enterprise need to analyze specific
factors as well as technology development trends in technology to get their business
strategy accordingly.
e. International environment (international factors).
Currently trend of regionalization and globalization has been an inevitable trend.
Thus the risks, opportunities from the international environment affecting business
more complex, larger, due to differences in culture, society, institutional structures,
policies and economics. So every business must approach and analysis environment
perspective of their industry. In which factors on free trade agreements, tariff
barriers, international quality standards, antitrust, anti-dumping must be analyzed
carefully to take advantage of limited risk, building business strategies accordingly.
2.1.2. Micro environment
Elements of the micro-environment include: pressure from customers (buyers),
pressure from suppliers, the risks from potential competitors, the risks from
alternative products and services, the existing competitors. A theoretical and practical
strategy of the Harvard School of Business Administration - Michel Porter has
developed five models of competitive pressure as a basis for strategies to help

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environmental analysis is as follows (Source: In-Class Materials & Strategic
management textbook, 2009 – Le The Gioi, Nguyen Thanh Liem, Tran Huu Hai):
Potential competitors
Risk of new competitors

Enterprises and
competitors

Suppliers
Ability to
pressure from
suppliers

Competition in the
industry

Customers
Ability to
pressure from
customers

Alternative products

a. Analysis for current competitors
This is the first force in the model of M. Porter. This force is competitors are
already positioned in the market, if the competitors are still weak; the businesses

will have the opportunity to increase the prices and can get more profits.
Conversely, the greater competitive pressure on price competition is increasingly
fierce. The analysis of the current competition requires firms to learn, to investigate
the specific information of competitors. On that basis, analysts were technical
potential, the potential of human resources, financial capacity, marketing systems,
operations management, capacity, quality, leadership ability to see clearly the
strengths and weaknesses of the competitors (Source: In-Class Materials & Strategic
management textbook, 2009 – Le The Gioi, Nguyen Thanh Liem, Tran Huu Hai)
No
1

Factors

Important
level
(0 ÷ 1)

Competitor A
Rank
Score
(1 ÷ 4)

Competitor B
Rank
Score
(1 ÷ 4)

Corporation
Rank
Score

(1 ÷ 4)

Thereby making the general remarks of the competitors against businesses.

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b. Potential competitors
These are the competitors include the existing enterprises are not competitive, but
they are able to compete if they decide to enter the industry. The number of
potential competitors depends greatly on the barriers to entry. So when considering
potential competitors to analyze all elements from the entry barriers to industry
advantage on scale, product differentiation, capital requirements, switching costs,
the ability access to distribution channels, cost disadvantages regardless of size,
government policies and actions can cope, to assess fully the risks from potential
competitors .
c. Suppliers
This force includes suppliers on raw materials, fuels, materials, equipments, labour,
transport, and services ... It can be seen as a pressure when they are capable of
increasing input prices or reduce the quality of products and services they provided.
Therefore, when developing business strategies, the enterprises need to analyze and
devise an appropriate strategy for this force.
d. Customers
This is the force that creates the bargaining ability of the buyer, if there are many
the buyers, it could create opportunities for business, whereas it can be seen as a
threat to require businesses forced to reduce prices, or that higher quality of goods
and services.
e. Alternative products
The alternative products are other products that can satisfy the needs of consumers.
To predict its risks from alternative products and limit the risks to the enterprises

when developing business strategies need to analyze the prediction in policy, the
development of science, technology, price trend whole, the trend of consumers ... to
build business strategies accordingly.

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Beside 5 above factors in the process of developing business strategy needs to pay
attention to other factors such as the distribution system, community and union ... to
fully analyze the opportunities and risk for enterprises to build business strategies
accordingly.
Combining elements of the macro environment and micro environment have the
following diagram (Source: In-Class Materials & Strategic management textbook,
2009 – Le The Gioi, Nguyen Thanh Liem, Tran Huu Hai):
Technological
environment

Economic
environment
Potential competition

Pressure from
suppliers

Enterprises and
competitors

Pressure
from buyers

Alternative
products
Social, cultural
environment

Legal, political
environment
Natural
environment

The analysis of the external business environment is very important for every
business, it helps to identify business opportunities and the threat to the proposed
business strategy accordingly. To assess the impact of external environment on
business activities of the creation of the Matrix (EFE) - (Source: In-Class Materials

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& Strategic management textbook, 2009 – Le The Gioi, Nguyen Thanh Liem, Tran
Huu Hai)
EFE Matrix

Make a
list of
external
factors

2.2.

The

importan
ce of
factors
0,0 ÷ 1

Factors
classific
ation 1 ÷
4

Scoring
factors

Points of
elements
on the list

Analysis and evaluation the internal environment of enterprises

The analysis and evaluation of internal environment within the enterprise aims to
appreciate its strengths, weaknesses and competitive advantages to build their
business strategy accordingly. It is necessary to analyze financial factors,
infrastructure, technology, marketing, human resources, manufacturing, research
and development, operations management, branding, company culture to promote
all the limited strengths weaknesses, create competitive advantage for businesses.
2.2.1. Human resources
This is a very important resource, it is associated with the existence and development
of the business. Human resources administration of the business is the recruitment,
training, placement, appointment, transfer, and personnel policies. The analysis of
human resource factors aims to clearly see the strengths and weaknesses in the

management of enterprise human resources to work out an appropriate strategy.
2.2.2. Financial capacity
Analysis and assessment of these factors on the basis of considering the specific
facility factory machinery, raw materials, modern level of technology that
companies are applying and evaluating the current status about the financial

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situation, the total assets, capital, capital structure, profitability, ability to raise
capital, ability to secure financing of the enterprise ...
Analysis and assessment of financial activities of the business to evaluate the
financial and accounting activities can meet the task requirements or not, or guarantee
the truthfulness, which draws from the strengths and weakness of this activity
2.2.3. The work of production and operations
Analyzing and evaluating the work of production and operation of enterprises on
the basis of analysis of production plan, plant capacity, considering the scale is
justified, considering the efficient use of wireless Advanced Technology in the
manufacturing operation, evaluating the quality of the work force, quality of goods
produced, assess the cost of production or cost of a product unit, to clearly see the
strengths weaknesses of the enterprises in this work.
2.2.4. Marketing activity
Analyzing and evaluating the work of Marketing of the business is to focus on
analysis and evaluation of systems Marketing, plans on products and services, sale,
customer analysis, pricing problems, issues about the effectiveness of the Marketing
to clearly see the real situation of enterprises in this work, clearly the strengths and
weaknesses to build an appropriate strategy.
2.2.5. Operations management
To properly assess the administrative operations of the business. It is required to
analyze the actual situation on the model of the business, the organizational model

of the enterprise must meet the requirements and development activities. Avoid
setting patterns have overlapping functions.
On the other hand to analyze the functional activities from planning to
implementation, the policies for encourage, placement of human resources, controls
activities, building research system, development and application of information
technology systems in the operation of the business ... to consider the actual

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situation of operation of the business administration clearly see the strengths and
weaknesses in this work. On the other hand, need to clearly analyze the leadership
capacity of the business, if business leaders have good qualifications for enterprises
will grow and if the leaders do not have the business capacity, the enterprises can
not grow or survive.
2.3.

Method of strategy analysis: SWOT Matrix, IE Matrix

2.3.1. SWOT matrix
SWOT matrix is a matrix of strengths - weaknesses - opportunities - risks. This
matrix helps managers form strategies based on a combination of factors of
strengths, weaknesses, opportunities, risks (Source: In-class materials & Strategic
management textbook, 2009 – Le The Gioi, Nguyen Thanh Liem, Tran Huu Hai):

SWOT Matrix
SWOT
MATRIX
Opportunities – O
1………………….

2………………….
3………………….
Threats – T
1………………….
2………………….
3………………….

Strengths – S
1………………….
2………………….
3………………….

Weaknesses, - W
1………………….
2………………….
3………………….

Strategies

Strategies

1………………….
2………………….
3………………….

1………………….
2………………….
3………………….

Strategies

Strategies

1………………….
2………………….
3………………….

1………………….
2………………….
3………………….

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S-O strategy : Use the strengths to take advantage of external opportunities

-

W-O strategy: Overcome the weaknesses to take advantage of external
opportunities

-

S-T strategy: Use the strengths to cope with threats

-

W-T strategy: Overcome the weaknesses to reduce the external threats .

2.3.2. IE matrix : Evaluation of external and internal factors

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Using parallel to the SWOT matrix for comparison with the SWOT matrix, it is
more quantitative (Source: In-Class Materials & Strategic management textbook,
2009 – Le The Gioi, Nguyen Thanh Liem, Tran Huu Hai).

Factors from environment within EFE

IE Matrix
Factors from environment within IFE
Strong – 3

Average – 2

Weak – 1

Strong – 3

1

2

6

Average – 2

3

5

9

Weak – 1

4

7

8

-

If enterprise is positioned in the 3 cells 1, 2, 3: under the fast-growing area.

-

If the strategy of the business is positioned in the 3 cells 4, 5, 6: a selective
growing area or stable selection strategy

-

If enterprise is positioned in the 3 cells 7, 8, 9: as retreating orientation.

With the contents described above, we considered and studied the entire
theoretical basis, concepts, theories and analytical basis to develop business
strategies of enterprises. We must capture firmly theoretical basis to be applied in
practice in your business to set out guidelines and strategies in accordance with
objective rules to ensure the survival and development of enterprises .

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CHAPTER II –THE SITUATION OF VIETNAM AIRLINES
1.

BRIEF INTRODUCTION ABOUT VIETNAM AIRLINES

Enterprise’s name: Vietnam Airlines Corporation (referred to Corporation)
Type of enterprise: MTV Co. Ltd.
Head office : No.200 Nguyen Son street, Long Bien district, Hanoi city
Representative

: Mr. Pham Ngoc Minh – General Director

Charter capital

: 8.942.000 million dong

Scope of business: Investment, management on investment capital and direct
production, Air transport for passengers, baggage, cargo, parcels, Maintenance of
aircraft, engines, spare parts, aviation equipments and other technical equipments,
Production of components, spare parts, supplies of aircraft and other technical
equipments; Supply of technical services and spare parts for airlines in the country
and abroad. Import and export of aircraft, engines, spare parts, aviation equipments
(rent, lease, hire for purchase, purchase and sale) and other items as prescribed by
the State. Supply of technical and commercial services in ground, services at the
passenger terminal, cargo terminal and services for delivery of goods. Agency
services for airlines, aircraft manufacturers, engines, equipments and spare parts of
aircraft, other transport companies. General aviation operations ...

A brief history of formation and development: Vietnam Airlines Corporation was
founded on 27/05/1996 under Decision for formation of State-owned Enterprise No.
328/TTg of the Prime Minister based on links of 20 businesses in aviation services,
and Vietnam Airlines is considered as the core. By 04/04/2003, the Prime Minister
signed the Decision No. 372/QĐ-TTg on the pilot organization and operation under
the Parent Company - Subsidiaries in Vietnam Airlines on approval for
organisation’s charter and operation of the Parent Company, Vietnam Airlines
Corporation. Accordingly, Vietnam Airlines Corporation is a State-owned
Company, operating under the Law on State –owned - Enterprises. By 23/06/2010,

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the Prime Minister signed the Decision No.952/QĐ-TTg on the on transformation
of the Parent Company - Vietnam Airlines Corporation Company founded MTV
Co., Ltd owned by the State..
Structure model of organization: Corporation shall operate under model of the
Parent Company - Subsidiaries based on the experience of some advanced airlines
in the world such as Singapore Airlines, Cathay Pacific, Thai Airways ... By
30/06/2010, the Corporation included 4 dependent units, 15 Subsidiaries, 01 service
units and 09 associated companies.
2.

MACRO

ENVIRONMENTAL

IMPACTS,

AFFECTING

THE

ACTIVITIES OF VIETNAM AIRLINES
2.1. Period of 2001-2010
2.1.1.Economic, politics, social environment
Decade of 2001-2010 as the decade witnessed the rise of emerging economies such
as China, Brazil, India and other economically dynamic region such as ASEAN,
Latin America. World economic growth has averaged 3.2% per year, thanks to the
drag of the crucial ship of this growth. Economy, once again made clear cyclical
feature with crisis on global scale 2008-2009, making air transport market
decreased in this decade
Political situation, regional security and world in past 10 years has been
complicated. Terrorist events on 11/09/2001, war in Afghanistan, Iraq and the
SARS disaster (2003), avian influenza in 2005 had occurred and negative impact to
the airline industry, made passenger markets dropped sharply, the cost of insurance,
market launch costs has risen.
Since 2006, jet fuel prices increased strongly and impacted continually on the
operation of airlines. Particularly in June of 2008, oil prices up to $ 147 per barrel,
fuel costs for airlines rose up to nearly 40% of total costs, while normally only
about 25-28%. The crisis and increases in fuel prices continually affected strongly

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to the airlines, the aviation market in the world lost $ 50 billion in past 10 years.
Many small airlines have been forced to protect its bankruptcy, must be reformed,
merged or restructured.
Located in the economically dynamic region in the world, Vietnam is one of the few
economies in Asia - Pacific region to achieve and maintain growth rate is relatively

high in a long time. Economic growth in Vietnam highest in the ASEAN region and
second in Asia - Pacific, after China. Growth of average GDP in period of 2001 2007 reached 7.73% per year. Period of 2008-2009, although affected by the global
economic crisis, but Vietnam demonstrated the ability to overcome the crisis with
GDP growth of 6.2% in 2008, 5.3% in 2009 and growth of 6.5% as forecast in
2010. Per capita income in 2010 is forecast at 1200 USD, increased by 2,9 times
compared with 2001.
After 10 years for implementation of economic –social development strategy in
2001-2010, Vietnam's economic potential is enhanced, the country was out of the
underdeveloped status, entered the group of developing countries with average
income. Domestic political situation is stable, Vietnam has been a safe destination
in the region. Vietnam has officially joined the WTO in early 2007, opened up new
opportunities to enhance cooperation, a new economic development.
By the end of 2009, there were 89 countries and regions invested nearly 11,000
projects in Vietnam with total registered capital of 178 billion dollars, in which $ 68
billion was made. Vietnam's credibility has been enhanced than before. Despite
global crisis, but official development assistance (ODA) to Vietnam in late 2009
commitment is up to 8,063 billion dollars, this demonstrated that the investment
environment in Vietnam is still attractive, foreign investors continue to believe in
the medium and long term future in Vietnam.
Policy fort development in period 2001 - 2010 have been somewhat changed the
face of tourism in Vietnam. Vietnam tourism growth is relatively stable with
average speeds are relatively high (about 20% per year), promote the development

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of many other economic sectors, particularly air transport industry. Tourism is
positioned in the list of 5 industries of largest foreign currency income generation
for the country with 4,05 billion dollars in 2009, accounting for over 55% in the
structure of service exports.

With the high attraction of tourism and business confidence, a growing number of
tourists and the businesses in the world will evaluate Vietnam as their destination.
Until now, Vietnam Tourism has signed 43 cooperation documents with other
countries and territories around the world, customers relationship and partners with
over 1,000 customers of 60 countries and territories.
However, the quality of tourism services in Vietnam is not high, monotonous
tourism products, lack of particular, low uniformity (low active links between units
providing travel services, accommodation, value-added services ...), duplication and
lack of regulation; The tourism industry may have launched the program to scale
and efficiency, not brand development strategies for tourism, quality relationship price is not reasonable, leading to overall quality of tourism is less competitive and
reduce the attractiveness, Vietnam is still considered expensive destination
compared to other countries in the region. These are the main factors that reduced
competitiveness and limited Vietnam's tourism sector with higher growth.
Aviation market of Vietnam in particular and Asia - Pacific region in general have
fastest development speed in the world. General aviation market in Vietnam, grew
about 15% - 20% per year, of which domestic market growth is always above 20%.
The crisis years 2008, 2009, the aviation market in Vietnam has increased about 4%
per year.
Besides the favourable macroeconomic conditions, VIETNAM AIRLINES often
receives attention from the Party, Government, promptly removes the difficulties,
supports and facilitates the expansion and business development activities,
particularly in development of fleet, enhancing competitiveness.

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Chart. Comparison of macroeconomic indicators of Vietnam and guests
output of Vietnam

GDP growth

Growth of international visitor to VN
Growth of aviation market
Growth of output visitors of VN

(Source: Corporate Planning Department – Vietnam Airlines)
Along with the end of the Cold War, the advent of the Internet, advances in
information technology sector, telecommunications has opened a new era of
globalization a powerful place, promoting capital flow movement investment,
resources, trade and exchanges worldwide.
2.1.2.Legal environment
International Aviation is not out the trend of globalization, the civil aviation
operations is dominated by the trend of globalization of world economy, the trend of
liberalization and commercialization activities of civil aviation; trend of reducing the
protection and control of the state through privatization of airlines, airports; trend of
alliances, links, purchase, merger between the airlines continue to develop strongly
and the trend of creating competition among the major airports in most areas. Series
of aviation alliances such as Star Alliance, OneWorld, SkyTeam continue to admit
new members and expand their activities. The merger and acquisition services
between major airlines such as Delta - Northwest, Air France-KLM (Royal Dutch
Airlines) .. help companies get into troubles can stay in the market.

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The past decade has witnessed the birth and growth of the business model, nontraditional airlines - low cost airline (LCC Low-cost carrier), made significant
changes in the global aviation industry, including Vietnam. On the one hand, LCC
has launched promoting market size, which gave more products for customers to
choose with lower costs. On the other hand, by taking to reduce costs and low fares
are condition to exist and develop, LCC has pushed the market competition in air
transport around the world becomes more intense, that even make LCC is more

difficult to survive due to low capital resources (80-85% LCC bankrupted within
the first 5 years), and also made the traditional airlines shared its strong market and
embarrassing to deal competition with LCC. Actually showed that moderate growth
of the number of airlines will help promote the healthy development of the market,
but if the growth in large numbers, it can affect the ability to focus and use of
resources, effectively, which should only be limited in each national economy.
According to World Aviation Association IATA, rapid growth in developing
countries and the recovery in North America helped the world's aviation industry
recovered quickly this year to forecast profitability in the airline industry in 2010 to
15.1 billion dollars thanks to the global economy has recovered, went up to against
8.9 billion previously. This record sales marks the unexpected recovery of the
industry after losing 10 billion dollars in 2009 and 16 billion dollars in 2008. Director
General of IATA, Mr. Giovanni Bisignani, said that the world is changing for
airlines, the market is developing quickly moving industry centers on the East.
(Saigon Marketing Newspaper – 15/12/2010)
In recent years, to meet market demand as well as support social and economic
development of the local general in the country, market and domestic route network
subject to control strictly from the State, especially in the approval of prices. This
policy brought into play surely in stabilizing prices, mutual support between the
economic sectors, between localities, contribute to economic development of the
country, but the sector also revealed significant weaknesses. On most domestic flights,

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VIETNAM AIRLINES often covers losses or provides perfunctorily, the law of supply
and demand are not reflected properly.

Roadmap for sociable application rates started from 2003, in the unfavourable
context for the airline industry, but has confirmed the correctness of the policy and

have proven that the "publication in domestic air transportation" sync with the
market of the service sector (payment for the law of supply - demand) as solution is
beneficial to the overall national economy, the economic development of local
society, business of air transport and consumers (passengers) compared to the
supply perfunctorily granted in nature. The application of market mechanisms for
domestic aviation market has been carried out by most countries in the world and
actually proved its correctness.
In 2007, the Ministry of Transport has regulated its landing duration (slot) at the
airports of Noi Bai and Tan Son Nhat, making the ability to regulate the domestic
landing duration to negotiate and arrange hours of operation with the international
airport of VIETNAM AIRLINES is strongly influenced by the right to regulate
international airport mostly belong to the national airlines.
Law on Vietnam Civil Aviation was adopted in June 2006 to build a premise for the
socialization of the air transportation industry, has created a driving force for
competitive air transport market of Vietnam, developed with fast speed.
On the basis of Law and documents under the Law (Decree No. 76/2007/ND-CP
dated 09/5/2007 of the Government), 4 new private airlines were established are
Indochina Airlines, VietJet Air, Mekong Air and Trai Thien Air Cargo; In which
Indochina Airlines, which has exploited the official first commercial flight on
24/11/2008 used 02 B737-800 aircraft with two flight operators, but stopped
operating in late 2009. VietJet Air, Air Cargo Trai Thien, Mekong Air in the
implementation phase are exploited.
Thus, Vietnam currently has 08 airlines licensed the business certificate of air
transport are (i) 04 existing airlines are Vietnam Airlines, Jetstar Pacific Airlines,

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