LOT Heads To Vietnam

This week LOT Polish officially confirmed plans to commence services to Hanoi, Vietnam. The Hub investigates why LOT has chosen Vietnam.

Star Alliance member LOT Polish confirmed recently that, effective November 13^th, it will begin new non-stop scheduled services from its Warsaw hub to Hanoi, Vietnam, on a thrice-weekly basis with B767-300 aircraft.

THE EUROPE TO VIETNAM MARKET

The route will be the first scheduled link between the city pairs and indeed the only scheduled link between Poland and the Far-East.

LOT currently operates westbound scheduled long haul services to JFK and Toronto from Warsaw, as well as Chicago from Warsaw and Krakow according to November flightbase data. Hanoi, however will be its only long-haul scheduled eastbound destination.

Scheduled data currently illustrates that there are currently 33 weekly scheduled non-stop flights from Europe to Vietnam which are summarised in the table below.

Source Flightbase 14-20 November 2010

Vietnam Airlines operates 58% of all scheduled seats from Europe to Vietnam, with other carriers currently operating the Europe to Vietnam market comprising of Air France, S7, Transaero and Aeroflot. With only five cities currently served in Europe from Vietnam, linking Warsaw may seem a strange choice given even London does not have a non-stop service.

In terms of passenger traffic, the table below illustrates market share from Europe to Vietnam by carrier.

Source IATA BSP data (Airport IS) June 2009-2010.

Interestingly close to a million passengers flew between Vietnam and Europe between June 2009-and 2010, however just over a quarter of these passengers (269,878) flew on non-stop services which is illustrated by the fact that Thai Airways International, Cathay Pacific and Singapore Airlines (none of which operate non-stop services between Europe and Vietnam) are in the top five carriers by passenger share.

CENTRAL EUROPE WILL PROVIDE A LOT OF OPPORTUNITY

The O+D market between Poland and Vietnam is relatively small, with just over 18,000 passengers having flown in the 12 months from June 2009 to 2010 with the majority of passengers flying via Frankfurt and onto Vietnam Airlines services. This data will not, however capture, surface leakage to Frankfurt.

There is, however, a large Vietnamese diaspora in Europe. Vietnam itself has a population of over 86 million and there is an estimated 30,000-50,000 Vietnamese currently residing in Poland

The Vietnamese also represent the largest Asian population in Germany which has convenient access to flights to Warsaw. With the market being heavily ethnic with some leisure traffic, capacity should be relatively easy for LOT to fill. Other options from Europe, which are Frankfurt and Paris, are backhauls and likely to be more expensive. Scandinavia served as a refuge for Vietnamese refugees and can also provide source markets for this new service.

LOT, however, will be able to capture traffic from Central and Eastern Europe, particularly as Prague and Vienna do not have a non-stop service to Vietnam, consequently, LOT will be able to feed passengers into its long-haul network.

The O+D market from Vienna to Vietnam is approximately the same size as the Warsaw to Vietnam market which will also provide feed. Prague, however, could provide a major source of traffic for LOT's new service. Prague to Vietnam has a large O+D market of over 65,000 passengers. The Prague market is currently is fed through its SkyTeam partner Air France via Charles de Gaulle.

LOT will aim to capture this traffic, and unlike CSA Czech Airlines has the necessary long-haul aircraft to operate long haul service, noting that CSA Czech Airlines A310 equipment is used for its charter division.

It would appear that LOT has found a unique route, but like its former service to Beijing, the question will be whether the market can deliver the volume needed to survive.There does not appear to be a deal with Vietnam Airlines given their respective alliance positions.It will certainly be a route best served in the future for the Dreamliner.