As Southeast Asia's skies grow increasingly crowded, it's getting harder for airlines to stand out, let alone make money, when rivals are slashing fares to fill seats. But that hasn't deterred VietJet Air from staking its claim to a piece of the pie.
The low-cost carrier (LCC) boom of the past decade or so has transformed travel, especially in Asia, where established operators continue to add aircraft and expand their route networks.
For a newer entrant like four-year-old VietJet Air, the key to success will be to consolidate its domestic dominance while also seeking international routes on which demand is booming. At the same time, it wants to build a distinctive image, according to vice-president Nguyen Thi Thuy Binh.
"We just want to be the favourite airline in the world," she told Asia Focus. "We're not just a low-cost or hybrid carrier. We will be the consumer airline. That means we will deliver what customers need ... so we can change to a 'new-age' carrier."
Transport, she explains, is only one core service of an airline operation. VietJet wants to go beyond "transport" by offering inflight experiences that create intimacy between consumers and the company.
"In the past, people thought of air transport as a luxurious transport means. Now we are changing the mindset and making people more familiar with the airline," said Ms Binh.
Fancy a wedding, a live singing performance or a catwalk show in the sky? VietJet has offered them all. Its youthful, offbeat approach has won it a lot of fans -- and raised eyebrows on occasion, most notably when beauty pageant contestants in bikini tops paraded down the aisles.
"The way VietJet does things is mostly different," said Ms Binh. "We don't follow the old, traditional way of an airline that focuses only on transport service. But we will focus on service quality for passengers."
Service quality starts with making online ticketing as easy as possible. The airline is also developing a self check-in kiosk and mobile check-in technology, as well as diversifying payment channels.
Given the economic health of Asia and the rising affluence of its middle class, she said, there is strong potential in both domestic and regional markets, which has encouraged operators to pursue rapid expansion plans.
"In particular, with our hybrid model, we will ensure cheap and affordable prices, but we will focus more on service quality through diversification of product and service offerings," she said.
For example, in addition to its base of budget-conscious travellers, the airline intends to serve premium passengers who demand flexible flight schedules and privacy during the flight. A wider variety of service levels will lead to more tiers of ticket prices, and higher fares in certain seasons, but overall the emphasis will be on value for money.
As Asean prepares for economic integration and open skies, opportunities exist for airlines to expand in many countries, but these come with challenges. In some countries, Ms Binh said, airport infrastructure has not kept pace with market growth.
Political stability is another make-or-break factor when it comes to tourism and the business-travel market. When events conspire to depress these markets, LCCs sometimes are forced to cut prices to create travel demand. But Ms Binh is confident that VietJet can manage through good times and bad.
"It's like the story of the chicken and the egg. Some people say that once demand appears, then the product will come. But we think that when we have the product and service, we can stimulate the demand," she said.
At times when demand is slow, the carrier can use promotional fares to encourage regular customers to take trips that might not have considered making, as well as attract new customers who have never flown before.
While VietJet Air has a large base of young leisure travellers, "we also carry businessmen and government officers", said Ms Binh, noting that the Vietnamese government encourages businesses and government departments to optimise their costs by spending more of their travel budgets on low-cost airlines.
Passengers board a VietJet Air Airbus A320 at Tan Son Nhat airport in Ho Chi Minh City.
SPREADING ITS WINGS
VietJet leads the domestic Vietnamese market in terms of passenger numbers and is second in terms of aircraft numbers behind state-owned Vietnam Airlines. Other local competitors include Jetstar Pacific and Vietnam Air Services Company (Vasco), a subsidiary of the flag carrier.
"When we do business, there has to be competition because it supports development and growth. It's unavoidable," she said. "It's more important to find new ways to create new segmentation. We're not afraid because we're not looking at the same cake, we have to create a new cake."
VietJet holds a 43% domestic market share and it generates more than 70% of its revenue from domestic operations. It also contributes substantially to the growth of the aviation industry in Vietnam. During the first seven months this year, Ms Binh pointed out, the number of domestic air passengers grew by 26.7% from a year earlier and VietJet accounted for 70% of that growth.
When its fleet capacity increases, she added, the entire domestic market increases accordingly. Before VietJet entered the market four years ago, the air travel market was growing by an average of 15% per year. Since 2011, growth has been averaging 20% or more.
The no-frills carrier made its official debut on Christmas Day 2011, three years behind its original schedule. It won a licence from the government in 2007 and intended to start flying the following year, but the arrival of the global financial crisis led to a change in plans. Today VietJet operates 28 aircraft and, by the end of this year, additional deliveries will bring the number to 30.
"We have purchased 106 aircraft which will gradually be delivered at around 10 to 12 aircraft per year. So far the airline has received eight aircraft (Airbus A321s and A320s) in this order," Ms Binh said. Its global financing partners include Mitsubishi UFJ Lease & Finance Co Ltd and BNP Paribas.
VietJet is in now in the process of preparing for an initial public offering (IPO), expected to be completed within this year, but Ms Binh declined to provide further details.
The carrier's growing fleet will allow it to increase flight frequencies on existing routes, as well as to start new routes. VietJet currently travels to 35 domestic and international destinations, and will increase the total to 37 -- 25 domestic and 12 international -- with additional flights to Incheon and Busan in Korea later this year.
"Domestic routes are almost all covered. International routes will focus on North Asia, mainly Korea, Japan, Taiwan, Hong Kong and China," Ms Binh said, adding that VietJet now offered six regular routes to China and intended to add more connections to secondary cities.
"Hong Kong is a bit difficult in terms of the slot, but we hope the government will take care of this to develop the aviation industry. One or two years would be better, there's a lot of market there," she said.
Since it began operations, the company's annual growth rate has averaged 70-75%. By the end of 2019, it plans to be operating between 70 and 80 aircraft, "so the annual growth rate will be at least 50-60% every year. We could consider VietJet as the fastest growing airline in the region," Ms Binh said.
The average load factor on all its flights is around 90%, and the carrier expected to carry 20 million passengers this year, she said.
As part of its expansion, VietJet plans to add more flights between Bangkok and Vietnam to serve growing demand. It currently flies once a day between Hanoi and Bangkok, and twice daily between Ho Chi Minh City to Bangkok. The latter route will have three flights per day by December.
Apart from its operational hubs in Ho Chi Minh City, Hanoi and Danang, VietJet is opening its first international hub in Bangkok, in cooperation with Thai VietJet Air, which aims to build a domestic network in Thailand as well.
The Thai company is VietJet's first foreign joint venture. The parent hopes to use it as a model for other joint-venture carriers outside Vietnam in the future. The identities of the Thai partners have not been revealed.
The official launch of the Thai VietJet has been delayed because of the concerns raised about Thailand's air safety standards by the International Civil Aviation Organisation (ICAO) earlier this year. However, Ms Binh said the picture was starting to clear and "we will look for the right moment to start within this year".
"We need to grow fast," she said. "…but stability is important. We don't want passengers to be affected when they're travelling. I hope the government will fix this soon."