Vietnam's First-Ever Air Cargo Is On The Way

For the first time in Vietnam’s economy, there is a multi-industry company heading towards the pathway that others haven’t yet thought of: investing in many projects to serve aviation’s ambition. More importantly, their direction is breaking the perception of how aviation investment should be.

Vietnam Becomes A Hub For Global Outsourcing, Tech & E-Commerce Giants

Vietnam’s economic ascent began in 1986 with the launch of the so-called “Đổi Mới” reforms, which shifted Vietnam from a centrally planned economy to a more market-oriented one. Consequently, Vietnam’s GDP grew by an average of 6.7 percent per year between 1995 and 2020. By end of 2020, Vietnam’s GDP growth reached the lowest growth rate over the past 10 years but it is still considered a success compared to other countries amidst the pandemic. Because of this positive economic outlook, it will surely attract more foreign investment, increasing both capital and employment for Vietnam.

At the same time, there is a trade war between the US and China that make big tech companies consider moving their assembly lines from China to Vietnam. Also, there is also a shift away from the Trump administration in which multilateralism is regaining its position. As a result, there are significant opportunities for export as many global companies are moving to Vietnam with the effects of CPTPP, EVFTA and RCEP, Vietnam will become a hub for global outsourcing and freight transport.

IPP Group — A Vietnamese Private Conglomerate Spanning Diverse Sectors Including Fashion, Food & Beverage And Aviation

The stories of IPP Group are always attached to its founder and chairman: Mr. Johnathan Hanh Nguyen.

Mr. Johnathan Hanh Nguyen is one of the most trusted investors in Vietnam, as well as an iconic entrepreneur in the market. Under the management of Mr. Johnathan Hanh Nguyen, IPP Group has expanded its operations to 17 subsidiaries and 18 joint ventures. Over 30 years of business operation, IPP Group has collaborated & invested over 600 million USD in more than 30 projects all over the country, with the incredible growth each year and created more than 25,000 jobs. The group’s businesses ranging from fashion, food and beverage, liquor and tobacco, technology and education, non-aviation and aviation (including travel retail, duty-free, airport advertising, airport management), and investment services. IPP Group and Mr. Johnathan Hanh Nguyen have cooperated with such partners as SASCO, DFS and AUTO GRILL. Speaking of Mr. Johnathan Hanh Nguyen, we cannot help but mention his career in the aviation industry.

Mr. Johnathan Hanh Nguyen was a financial comptroller of a Boeing subcontractor in the US and a chief representative of Philippine Airlines in Indochina in the 1980s. In 1985, during the tough time of Vietnam economy, he returned from the U.S and became the pioneer to establish the first direct flight from Ho Chi Minh city (Vietnam) to Manila (Philippines). Since then, this event has opened the gate to bring Vietnam step by step closer to the world’s economy in the journey of global contextualization.

In 2010s, after the Government advocated allowing the private sector to invest in the aviation industry, Mr. Johnathan Hanh Nguyen became a “hot” name in Khanh Hoa province after Cam Ranh International Terminal opened investment bids. He thus felt very excited and motivated when he heard about Vietnam’s intention to allow the private sector to invest in the aviation industry. More happily, he carried out the project on his birthplace.

He worked for airlines for 10 years and provided aviation services for over 20 years, his passion for the aviation industry is ingrained in the blood. And, in 2021, Mr. Johnathan Hanh Nguyen plans to establish a cargo airline: IPP Air Cargo.

Why Establish An Airline Amidst The Pandemic, While The Whole Of Aviation Is Stumbling?

Shipping freight costs have skyrocketed 5 times higher (Source: Drewry Shipping's data) during the peak time of the pandemic. As for air cargo, the cost to carry freights from Europe to Vietnam is 3 times higher. In Vietnam, the demand for transportation is growing and the freight rates keep increasing too. Yet, foreign airlines already account for 88% of the air cargo’s market shares. Foreign carriers are setting prices because they are almost an oligopoly in the market, without any local competitors.

At this moment, Vietnam does not have a specialized airline carrying goods. Due to the pandemic, many domestic airlines have provided a temporary solution by converting passenger aircraft into cargo aircraft.

Opportunities for IPP Air Cargo vs foreign airlines?

Currently, foreign airlines are controlled by the aviation agreement that Vietnam signed with other countries to ensure fairness. This agreement means they cannot increase their number of flights. At the same time, foreign airlines carrying international goods are only allowed to arrive at Tan Son Nhat and Noi Bai airports. These goods are only in select markets and foreign airlines must continue to organize other domestic routes to bring the goods to more destinations.

IPP Air Cargo—A Game-Changer In Vietnam's Aviation Industry?

The rise of e-commerce is pushing the exceptional growth of logistics and transportation... and that plays a key role in the aviation industry’s development in Vietnam. By investing in infrastructure, plus optimal locations in the region, Vietnam is ready to compete with the other sourcing center, China, and freight & logistic center Singapore.

Also, acknowledging the aforementioned points and with its experience in aviation, IPP is taking a crucial step with IPP Air Cargo. IPP Air Cargo will be Vietnam’s first cargo airline that would carry goods from Noi Bai airport (Hanoi) and Tan Son Nhat airport (HCMC) to the other 14 local airports and many foreign destinations.

IPP Air Cargo plans to build logistic hubs at 5 major airports: Ha Noi, HCMC, Da Nang, Cam Ranh, and Can Tho. Another hub is under construction: Long Thanh International Airport in the south of Dong Nai province. IPP Air Cargo plans to start with 5 aircrafts in the first year and then will expand its fleet to 7 aircrafts in the next year. Finally, in the third year, they will increase to 10 aircrafts at which time they will be financially solvent.

The total capital spend is up to $100 million. IPP Air Cargo has been ready to launch for the past 6 months since early of 2021 and its direction is to invest in small and large aircrafts. They are applying for licenses and are expecting to start commercializing by 2022. IPP Air Cargo, along with other international airlines, will carry goods abroad and collaborate to bring transport cargo to every domestic destination within Vietnam.

This article is sponsored by IPP Travel Retail.