Risk of overloaded aviation infrastructure

Long Thanh international airport (LTIA)

>> International air traffic will take the spotlight

Aviation infrastructure to be accelerated

In accordance with the government's air transportation master plan, there will be 28 airports in Vietnam by 2030F, including 15 domestic airports and 13 international airports (up from 22 airports in 2022, including 13 domestic airports and 9 international airports): Long Thanh international airport (LTIA) and three upgraded domestic airports (Tho Xuan, Vinh, and Chu Lai); five new domestic airports will be developed through BOT, including Phan T

By November 20, 2022, LTIA has been formally designated as ACV's primary developer. LTIA has a 100 million passenger capacity with a total investment of around $15 billion. The project is divided into three phases, the first of which can accommodate 25 million passengers at a cost of US$4.3 billion (VND99,000bn). Phase 1 of the project is now being built, and according to ACV, it will be finished by February 9th, 2025. There are four subprojects in the project, and they are currently progressing as follows:

The first component project is running late. The Ministry of Transport (MOT) has authorized the investment policy for the office building of the airport authority, but other agencies have not yet allotted funding for their respective office development.

Component project 2 (on schedule): Construction of works for flight management, Vietnam Air Traffic Management Corporation as the investor has opened the bidding package for the construction of the foundation of the air traffic tower, expected to start construction in Oct22.

Component project 3 (on schedule): Construction of essential works, ACV as the investor has leveled the ground with 15.97 m cbm/115 m cbm (reaching 13.9%), and completed the pile foundation (1,545 piles) for the station area. ACV has issued bidding documents for the station package, which is expected to start construction in Nov-22. Currently, a specialized agency of MOT has commented on the technical design documents. For the items of ancillary works, ACV is choosing a technical design consultant.

Component project 4 (on schedule): Construction of other service works, there are 2/11 projects being in the investor selection procedures by the Civil Aviation Authority of Vietnam (CAAV). 9/11 projects are posting information to look for investors to participate.

>> "Opening the door" to invest in a private airport

According to Mr. Nguyen Dung, senior analyst at VNDirect, assuming Phase 1 starts on schedule, LTIA will serve as the industry's development engine starting in 2025F. LTIA is positioned to compete with existing regional hubs like Changi Airport in Singapore, Suvarnabhumi Airport in Bangkok, and Hong Kong International Airport to establish itself as a new transit center in Southeast Asia. According to the Civil Aviation Authority of Vietnam's (CAAV) master plan vision until 2050, LTIA will handle 80% of international passenger flow and 20% of passenger throughput from/to HCMC after phase 3 of LTIA is complete.

Aviation infrastructure constraint

The government anticipates a 9.6% annual growth in total passenger volume throughput. In a best-case scenario, domestic passenger volume throughput would rise by 9.8% p.a. from FY19 to FY30, while international passenger volume would rise by 9.2% p.a.

Additionally, with an absolute value of 0.7% points, the government is making a slight adjustment for the total traffic CAGR for the years FY19 through 30. Mr. Nguyen Dung thinks that this growth is feasible because, in addition to Vietnam's airports' expanding capacity, the country's potential for increased air traffic demand is enormous given the country's aviation industry's prior rapid expansion.

In Mr. Nguyen Dung’s view, the aviation infrastructure, however, cannot keep up with demand growth in the short term, and the Vietnam aviation infrastructure may become severely overloaded in 2023–2024F, when international tourists are anticipated to rebound rapidly.

"We anticipate Vietnam aviation airports may run at 132%/142% intended capacity in 2023-24F, before offloading from 2025F when major significant aviation infrastructure projects, like LTIA, the T3 terminal in TIA, and the T2 expansion in NIA, start", said Mr. Nguyen Dung.