IBS301m – FALL 2021

INDIVIDUAL ASSIGNMENT 1

VIETNAM AIRLINE

Instructor Mrs. Cung Thi Anh Ngoc

Student Tran Thu Hang HS150040

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TABLE OF CONTENTS

VIETNAM AIRLINE ..................................................................................................... 1

1. Introduce of the company ...................................................................................... 3

1.1. About the company:......................................................................................... 3

1.2. The Corporation's fields, branches and business lines: ................................ 3

2. Environmental analysis ( PESTEL) ..................................................................... 4

2.1. Political ............................................................................................................... 4

2.2. Economic.............................................................................................................. 5

2.3. Social ................................................................................................................... 6

2.4. Tenological .......................................................................................................... 7

2.4. Evironmental....................................................................................................... 7

2.5. Legal ..................................................................................................................... 8

3. Industry analysis .................................................................................................... 9

3.1. Intensity of Rivalry ............................................................................................. 9

3.2. Threat of entry ..................................................................................................... 9

3.3. Bargaining Power of Suppliers ......................................................................... 11

3.4. Bargaining Power of Buyers ............................................................................. 11

3.5. Threat of Subtitutes ........................................................................................... 12

4. Recommendation .................................................................................................. 12

4.1. Improve service quality ...................................................................................... 12

4.2. Establish a competitive pricing strategy............................................................ 13

4.3. Develop access opportunities and ability to attract customers ......................... 13

5. References ............................................................................................................. 15

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1. Introduce of the company
1.1. About the company:
• Vietnam airlines is the national airline of the Socialist Republic of Vietnam, a core
component of the Vietnam Airlines Corporation. The airline, under the management
of a seven-person board appointed by the Prime Minister of Vietnam, has routes to
Southeast Asia, East Asia, Europe and Oceania, with 46 destinations in 19 countries.
Headquarters are located at the two largest airports in Vietnam: Noi Bai International
Airport and Tan Son Nhat International Airport.
• Vietnam Airlines is the largest shareholder with a shareholding rate of 69.93%
Jetstar Pacific Airlines. The airline holds a 49 percent stake in Cambodia Angkor
Air, Cambodia's national airline, and 100 percent in VASCO, a small airline that
specializes in flying in the southern region of Vietnam.
• The airline is rated 3 stars, according to Skytrax standards. On June 10, 2010, the
airline officially joined the SkyTeam alliance, becoming the first Southeast Asian
airline to join the alliance.
• By the end of 2011, the corporation accounted for about 80% market share of
domestic aviation market in Vietnam and about 40% market share of tourists flying
to and from Vietnam
1.2. The Corporation's fields, branches and business lines:
• Air transport of passengers, baggage, cargo, parcels, parcels and letters.
• Maintenance of aircraft, engines, spare parts, aviation equipment and other technical
equipment; manufacturing components, spare parts, aircraft supplies and other
technical equipment; providing technical services and spare parts for domestic and
foreign airlines.
• Import and export of aircraft, engines, spare parts, aviation equipment (rent, lease,
hire purchase and purchase and sale) and other items according to the State's
regulations.
• Providing technical services for ground trade; services at passenger and cargo
terminals; Freight forwarding services; commercial services, duty-free sales at the
airport terminals and in the provinces and cities; apron services at airports,
aerodromes and other aviation services.
• Agency services for airlines; manufacturers of aircraft, engines, equipment and spare
parts; domestic and foreign transportation and tourism companies.

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• General aviation activities (flying topographic photography, geological survey,
calibration flight of aviation navigation stations, repair and maintenance of high
voltage power lines, oil and gas service, afforestation, environmental inspection,
search and rescue, etc.) search and rescue, medical emergency, flying in service of
political, economic, social, security and defense tasks...).
• Producing, processing, exporting and importing food to serve on board aircraft, tools
serving the air transport chain; export - import and supply of petroleum, aviation
grease (including fuel, lubricating grease and special-use liquids) and other
petroleum at airports, airfields and other locations.
• Finance, finance leasing, banking.
• Printing, construction, construction consultancy, labor import and export, and
scientific and technological services.
• Investment abroad:

+ Buy and sell businesses

+ Contributing capital, buying shares or transferring contributed capital, selling shares

in accordance with law;

• Other fields, branches and professions as prescribed by law.

• Scope of business: domestic and foreign.
2. Environmental analysis ( PESTEL)
2.1. Political

The stability of the political system is one of the factors that greatly affect the economic
development of a country as well as the business strategy of enterprises. when
enterprises decide to invest in expanding the market, especially in the direction of
developing the route network of air transport enterprises. For example, the security
situation in Iraq, in Lebanon, Thailand recently, airlines often cancel flight routes to
these areas for security reasons and unstable political system, due to aviation business.
in these areas often have a high level of risk.

Vietnam Airlines is among the companies under the management of the Government,
this is an advantage due to the support of capital, business protection, and financial
policies, especially in difficult times due to the influence of the government. terrorist
activities, wars and epidemics and fuel prices, etc., currently hold the monopoly position
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of exploitation in Vietnam. However, the domestic legal system has gradually been
adjusted, improved, more transparent and in line with the integration trend (ASEAN,
APEC, WTO,...), especially international aviation law. In Vietnam, this will limit the
protection of the State for Vietnam Airlines, but it is also an opportunity for Vietnam
Airlines to reassert its position against competitors in the market of air transportation.
Air freight. Vietnam is considered a safe destination in the region, this is also a signal
that the number of tourists and investors will come to visit and explore the investment
market, the prospect of investment volume will increase. in the coming years and the
amount of goods traded on the markets will also increase.

2.2. Economic

Vietnam Airlines' freight business is not immune to fluctuations in the economy, such
as factors such as GDP growth rate, inflation rate, level of control and reform. corruption,
the scarcity of fuel sources, the government's implementation of AFTA commitments
and commitments when joining the WTO, etc. will directly affect the source of goods
exchanged and traded on the market, which means it will affect impact on the cargo
volume of Vietnam Airlines.

Vietnam is the 46th largest economy in the world. Its nominal GDP in 2018 was worth
$245 and is expected to reach $265 billion by the end of 2020 (Trading Economics,
2020). The country has made a lot of progress in poverty eradication and lifted 45
million people out of it between 2002 and 2018 (The World Bank Group, 2020). Its
economic outlook for the next few years is positive and robust. It is interesting to note
that Vietnam has come out as one of the largest beneficiaries of the trade dispute
between China and the USA. However, it should also be noted that Vietnam has been
struggling with high price increases for years.

Obviously, when the social economy develops, the amount of domestic and foreign
investment increases will increase the amount of goods traded on the market, which
means the demand for transportation will increase. With the above signals about
Vietnam's economic prospects, it will certainly increase the volume of goods traded
through airports, which will contribute to Vietnam Airlines achieving a high growth rate
in the coming years.

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 2.3. Social

Each country and territory has its own unique cultural values and social factors, and
these factors are the characteristics of consumers in those regions. Cultural values are
the values that make up a society, which can foster the existence and development of
that society. Therefore, common cultural elements are protected on a very large scale
and closely, especially spiritual cultures. In addition to culture, social characteristics
also make businesses interested in market research, social factors will divide the
community into customer groups, each group has its own characteristics, psychology,
income different input:

+ Average life expectancy, health status, nutrition, eating

+ Average income, income distribution

+ Lifestyle, education, aesthetic views, life psychology

+ Living conditions

Along with the development speed of the economy, culture also has changes in line with
the modern rhythm of life. People are saving more and more time, with increasing
income, aviation is the right choice of many people.

In the past few years, Vietnam has been rated as a safe destination, the leading tourist
attraction in the world, which has made the number of tourists to Vietnam increasing,
especially the number of visitors from Europe. , North America , Japan , Korea ...

The development of the tourism industry leads to an increase in revenue of the aviation
industry thanks to the increase in tourists. Not only foreign tourists, Vietnamese people
are increasingly interested in traveling, including middle-income people, which also
significantly increases the number of passengers in the air transport industry.

Another mentality of the Vietnamese people that exists is that flying shows class.
Vietnamese people have long considered flying as one of the ways to express and assert
themselves, which creates favorable conditions for airlines to tap into the subconscious
needs of consumers.

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 2.4. Tenological

The peculiarity of the air transport industry is the speed of application of new and
advanced technologies because this is a special type of business that requires high
operational safety, if negligence leads to an accident. the consequences are dire and
almost impossible to recover the damaged property. Vietnam Airlines fleet is always
upgraded according to new aviation technology, mainly using technology of famous
aircraft manufacturers such as AIRBUS, BOEING, etc., combined with structural and
fuselage improvements. flight, engines, control systems to improve operational
efficiency and range of the aircraft. The development of science and technology has
created new generations of aircraft with specifications that better meet the requirements
of civil aviation transport such as longer range, stronger engine propulsion, Larger
aircraft capacity, lower noise, more fuel economy,... That is the generation of Boeing
777, Boeing 767, Airbus A320, A321 aircraft... that Vietnam Airlines is exploiting. This
is one of the important factors determining the quality, economic efficiency as well as
competitive advantages of air transport products.

2.4. Evironmental

Vietnam is one of the most beautiful countries in Asia. It houses 8 UNESCO heritage
sites and received around 18 million international tourists in 2019. Tourism has been an
important actor to transform Vietnam’s agrarian economy to a service one. However, it
is worth noting that the fear of corona virus (COVID-19) has been a threat to the tourism
industry and public health.

Rapid economic development has led to unsustainable exploitation of natural assets that
may impact on future potential for growth. Vietnam is badly affected by air pollution.
Similarly, water pollution is a big problem and has significant impact on human health.
Vietnam is highly exposed to natural disasters such as volcanic eruptions, floods,
droughts, earthquakes, floods, and typhoons.

The geographical position of Vietnam is also quite favorable for the development of the
aviation industry, with its position on the edge of Southeast Asia, in the middle of the
international air route connecting from east to west, from north to south. for the
construction of a route network between the US and Australia with short flights in
Southeast Asia and inland of Vietnam.
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With the characteristics on the route network of Vietnam Airlines built according to the
model of "shaft - spokes" with high operating frequency, good transit service in Hanoi
and Ho Chi Minh City, creating a competitive advantage with other airlines.
international freight flows to/from Indochina, Southeast Asia; gradually turning
Vietnam into a regional air transshipment hub, competing directly with major hubs such
as Hong Kong, Bangkok, and Singapore. Vietnam Airlines actively cooperates in
bilateral trade with international airlines, expands flight routes, overcomes subjective
limitations, and gradually selects partners to join a global alliance in line with the trend.
The general development of the world and the actual capacity of Vietnam Airlines, if
well applied the position of Vietnam's natural factors will contribute to a significant
increase in the airline's cargo output in these markets. However, Vietnam Airlines has
not fully exploited this advantage.

2.5. Legal

Although there are incomplete and overlapping laws, Vietnam has introduced many
regulations on air transport. The introduction of the Civil Aviation Law of Vietnam has
created a basis for airlines to conduct their business activities. Vietnam has begun to
open the civil air transport industry to the private sector, but with strict terms and
conditions, the establishment procedure is still complicated. At the same time limit the
participation of foreign investors , when it is stipulated that foreign investors only
contribute 49 % of the shares in the joint venture airlines . 2007 is an important year in
the history of Vietnam's aviation industry with the passage of a law allowing the
establishment of private airlines and foreign investors in the Vietnamese aviation market,
opening the event. This is the presence of one of the largest airlines in the world - Qantas
( Australia ).

Vietnam also began to negotiate and sign with a number of countries on the opening of
the airspace, as with the United States. countries in the Mekong sub-region ... , creating
opportunities for the aviation industry to develop abroad.

Another strict regulation of legislation related to the aviation industry is the emission
protocol. This is a fairly strict regulation on reducing emissions of aircraft. In the world
today, there are struggles to reduce emissions from air transport, putting airlines in

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passive conditions, forcing airlines to take measures to reduce emissions into the
atmosphere.

3. Industry analysis
3.1. Intensity of Rivalry

In recent years, Vietnam's air transport market has

really exploded as private and state-owned airlines
vie for market share in a price war.

Vietnam Airlines is highly competitive among

domestic airlines such as VietJetAir, JetStarAir,
Bamboo Airways… In the future, low-cost airline
services will continue to expand and the level of
competition will increase.

Along with competition in the domestic market, Vietnam Airlines also has to compete
with airlines from countries inside and outside the region. Fares for flights from Europe
to Vietnam have dropped significantly. If in the past, these routes Vietnam Airlines
competed mainly with French and German airlines, now, when German airlines have to
give way to airlines from the Middle East, Vietnam Airlines is forced to compete.
compete with very strong opponents, difficult to balance.

3.2. Threat of entry

We can divide new entry competitors of Vietnam Airlines into two main groups: small
and medium airlines in the region, and major airlines in the world.

• Small and medium airlines:

+ These are mainly newly established domestic airlines or small regional airlines that
have just opened routes in Vietnam, this group of airlines often take advantage of the
following advantages to compete:

+ Small and medium scale, compact management system leads to low cost.

+ Advanced technical technology to help reduce costs (take advantage of the Internet
for ticketing, use new generation aircraft more flexibly). For example, AirMekong uses

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Bombardier CRJ 900 series of jets, thereby doing unprecedented things such as direct
flights from Hanoi to Phu Quoc, Pleiku, and Con Dao.

+ Choose short routes, actively build new routes not yet exploited by Vietnam Airlines.

+ Divide a long flight into reasonable short segments (For example, with the route
HCM-Bangkok, a Cambodian airline can open a route HCM - Siemrep - Bangkok to
take advantage of a group of customers who like to travel. with the expectation that one
trip can go to 2 places).

+ Established under the model of a low-cost airline (minimizing costs in many ways
such as: homogenizing seat classes, using only one type of aircraft, eliminating food
services, free newspapers, wanting to be For service, you have to pay extra.) For
example, some airlines have been established: VietJet Aviation Joint Stock Company
(VietJetAir) or Air Mekong.

• Major airlines in the world

.+ Because Vietnam's aviation market is quite small, this group of large airlines often
does not build direct routes as well as domestic flights in Vietnam.

However, these airlines can compete with Vietnam Airlines by:

o Build a route to Vietnam with a transition to another country with a more stable
market (eg Thailand or Singapore) so that with the opposite direction from
Vietnam they will be able to lower prices a lot to promote their brand.
effectively, destroy the opponent, but the profit does not affect too much.
o Use strong financial potential to conduct strong discounts to build a name, build
trust in customers, cause small competitors a lot of difficulties, even bankruptcy.
o Linking with a domestic airline through the form of capital contribution. For
example: Qantas Airways once bought 30% of the shares and became a
shareholder. With Jetstar's strategy, thanks to its very strong potential, Quantas
Airways has helped Jetstar offer almost unbelievable prices.

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 3.3. Bargaining Power of Suppliers
With about 300 flights per day, the purchase of products by Vietnam Airlines from Dung
Quat Oil Refinery will help businesses save on transportation and warehousing costs
and not be under pressure of foreign currency in the context of the economy ( Pham.V,
2011) like nowadays. At the same time, contributing to reducing the country's trade
deficit balance. Since August 2010, Binh Son Refinery and Petrochemical Company has
sold to domestic and foreign partners more than 28,600 tons of Jet A1 jet fuel. It is
estimated that each year Dung Quat Refinery will produce about 400,000 tons of Jet A1
gasoline, meeting about 35% - 40% of the current fuel demand for Vietnam Airlines.

3.4. Bargaining Power of Buyers

3.4.1. For individual customers

Vietnam Airlines has the following forms of support for customers:

- For early and late evening flights, Vietnam Airlines will use the general price of
1,450,000 VND/way (excluding taxes and fees attached) for the route Hanoi - Ho Chi
Minh City, this price has been reduced compared to the previous rate. normally 34%.

- Discounts for the elderly, customers who are Vietnamese citizens aged 60 years or
older, when buying tickets on domestic routes operated by Vietnam Airlines and Vasco,
they will receive a 15% discount from the ceiling price of economy class. regulated by
the state

- Ticket prices for children:

+ For Vietnam Airlines.

• Children under 2 years old: 10% of adult fare

• Children from 2 years old to under 12 years old: 75% of adult fare

+ Compare with Jet Star:

• Children under 2 years old: free of charge

• Children from 2 years old to under 12 years old: 100% of adult fare

- It is one of the measures that Vietnam Airlines is taking to meet customers' price
requirements.

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3.4.2. For business customers

Cooperation in exploitation and development with other airlines such as: JapanAirlines,
China Airlines, Cathay Pacific….

3.5. Threat of Subtitutes

IDC's forecast for increased business travel is good news for the airline and hospitality
industries as they cater to this customer segment. This is also an opportunity for
companies that offer effective alternatives for business travel, such as web, video
conferencing services. Why spend a ton of money and waste precious time flying away
to a meeting when you can meet online or via video? But the success of these alternative
services poses a direct threat to the airline and hotel industries.

4. Recommendation
4.1. Improve service quality

4.1.1. Passenger service

• Simplify work processes, procedures, and processing time in order to save

opportunity costs "for customers.
• Upgrade the lounge for the most customers, business class.
• regular customers , important guests ( VIP ) .
• Organize separate first-class lounges of VNA at some foreign airports.
• Upgrade the quality of entertainment services for passengers on board (video,
audio, newspapers, souvenirs) and the quality of business services.
• Consider reasonable service costs, with key priorities to ensure competitiveness.

4.1.2. Commodity service

• Organize private cargo flights by aircraft of small tonnage, short-range and

medium-range flying in the region to meet the needs of carrying low-priced,
high-volume normal cargo in the East region - South Asia.
• Focus on prioritizing the maximum exploitation of large freight flows (from
Vietnam to Northeast Asia, Europe and North America) through taking
advantage of cargo loads on passenger flights by wide-body aircraft , combined
with the expansion of operations by cargo flights.

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 4.2. Establish a competitive pricing strategy

Developing a product selling price policy and optimizing revenue is always a problem
for businesses. With non-storage and non-storage goods such as air freight products, this
issue becomes even more important. The characteristics of air services are intangible,
the price determination should also be based on the perceived value of passengers.
Therefore, VNA needs to study and set up a price strategy in the following direction:

• Research the main factors to increase the ability to attract customers (quality or
price, brand reputation, safety) depending on the service or specific conditions,
but consider improving the quality instead of lowering it. prices to attract
customers.
• When setting the price, it is necessary to take into account the potential value
brought to the customer such as time saving, safety, destination.
• Continue to diversify fares according to customers , seasons of the year , time of
day to take advantage of excess load.
• Set a competitive price when offered in a market , for an object , at a specific
time.
• Enhance price competition tricks to the extent permitted by law.
4.3. Develop access opportunities and ability to attract customers
• Improve the operation of the network of branches and representative offices in
the country as well as abroad in order to establish a really effective branch
system.
• Improve the quality of staff in offices and branches in research, market analysis,
development and implementation of marketing plans.
• To diversify services and link transport - tourism to increase competitiveness for
both air transport and tourism. Continue to promote frequent flyer program
( FFP ) . Negotiating and signing FFP association agreements with other airlines
(especially alliance partners), corporations, hotels, credit card companies, car
rental... in markets big ; at the same time , participate in FFP programs of other
airlines.
• Continue to advertise in many forms such as coordinating with travel companies
to carry out festivals, sponsoring major domestic and foreign cultural and sports
events to promote VNA's image, increase presence in the international market.

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• Build an advertising program to the Vietnamese community living abroad,
especially in the US, in order to increase the rate of choosing VNA of this object
(currently the rate of choosing VNA for air transportation of this object is is
35 % ) .

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 5. References
About us | Vietnam Airlines. (2021). Retrieved 23 September 2021, from
https://www.vietnamairlines.com/au/en/vietnam-airlines/about-us
Chính trị - Tạp Chí Hàng Không Việt Nam. (2021). Retrieved 22 September 2021, from
https://www.tapchihangkhong.com/?s=ch%C3%ADnh+tr%E1%BB%8B
Công nghệ - Tạp Chí Hàng Không Việt Nam. (2021). Retrieved 22 September 2021,
from https://www.tapchihangkhong.com/?s=c%C3%B4ng+ngh%E1%BB%87
Địa lý - Tạp Chí Hàng Không Việt Nam. (2021). Retrieved 23 September 2021, from
https://www.tapchihangkhong.com/?s=%C4%90i
Pháp lý - Tạp Chí Hàng Không Việt Nam. (2021). Retrieved 24 September 2021, from
https://www.tapchihangkhong.com/?s=ph%C3%A1p%20l
BBC (2019) Vietnam country profile. Retrieved 25 September 2021, from
https://www.bbc.co.uk/news/world-asia-pacific-16567315
Trading Economics (2020) Vietnam GDP, Retrieved 25 September 2021, from
https://tradingeconomics.com/vietnam/gdp
Tran, A. (2019). Vietnam Airlines tìm cách đối phó với cạnh tranh từ hãng hàng không
mới. Retrieved 24 September 2021, from https://theleader.vn/vietnam-airlines-tim-
cach-doi-pho-voi-canh-tranh-tu-hang-hang-khong-moi-1560410776775.htm
Pham, V. (2011). Nhà máy Dung Quất cung cấp xăng cho Vietnam Airlines. Retrieved
25 September 2021, from https://cand.com.vn/Kinh-te/Nha-may-Dung-Quat-cung-cap-
xang-cho-Vietnam-Airlines-i183134/
Nhóm tác giả ( 2015 ) , Việt Nam hội nhập kinh tế trong xu thế toàn cầu hóa vấn đề và
giải pháp , NXB chính trị quốc gia , Hà Nội .
Tổng công ty hàng không Việt Nam ( 2010 ) , Chiến lược phát triển giai đoạn 2010-
2018 , Hà Nội .

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