UNLEASHING

VIETNAM’S
POTENTIAL
Accelerating Growth in the Aviation Industry through
Digital Transformation
TABLE OF CONTENTS

Introduction 2
Current State of Digital Transformation in
Vietnam's Aviation Industry 3-5
Digital transformation trends 4
State policies 5

Bottlenecks in the Digital Transformation

of Airlines in Vietnam 6-9
Air cargo 7
Modern retailing 8
Loyalty programs & personalization 9
Flight & crew operations 10-11
Supply chain disruption 10
Staff acquisition & retention 11
Technological development 11

Flying forward: Harnessing Digital

Innovations to Address the Challenges 12-17
Air cargo 13
Modern retailing 14
Loyalty programs & personalization 15
Flight & crew operations 16
Improving customer experience through
personalized and self-service convenience 17

Towards a Sustainable Digital Future 18-19

Conclusion 20
Introduction
In Vietnam - one of the world's most
rapidly expanding markets with a growing
young population1 - different industries
and sectors have recently experienced a
robust advancement of digital technology,
and the aviation industry is no exception.
Industry stakeholders have acknowledged
the imperative for digital transformation
and are progressively embracing it.

"Unleashing Vietnam’s Potential:

Accelerating Growth in the Aviation
Industry through Digital Transformation”
is the result of a collaborative market
research effort between IBS Software - a leading SaaS solutions provider to the
travel industry globally, and Viettonkin Consulting - a multi-disciplinary group of
consulting firms promoting international business relationships in ASEAN. Drawing
upon Viettonkin’s expertise and their team of seasoned professionals, IBS Software
has commissioned Viettonkin to produce this report after thorough market research
and interviews with key stakeholders in the Vietnam aviation industry.

The report aims to provide in-depth insights into the current state of digital
transformation within Vietnam's airline industry while analyzing the challenges and
opportunities that lie ahead. We also look at significant digital trends and
innovations that are shaping the aviation sector. Simultaneously, this publication can
be regarded as a reference on how Vietnam's aviation industry can proactively adopt
digital transformation trends in the near future.

We hope this market research report will serve as a valuable resource for
stakeholders in Vietnam's aviation industry and beyond.

Best regards,

Gautam Shekar
SVP and Regional Head, APAC & Middle East
IBS Software

1
Demographics in Vietnam - statistics & facts, https://www.statista.com/topics/5991/demographics-in-vietnam/
 Vietnam's aviation holds immense promise. Compared to
other emerging markets, Vietnam is home to a robust
economy, with the air transport sector contributing
substantially to its GDP2. The country also boasts of higher
levels of digital adoption. The government of Vietnam has
issued regulations3 to accelerate the national digital
transformation process with ambitious goals and objectives,
also encompassing the aviation industry.

THE CURRENT STATE OF

DIGITAL TRANSFORMATION IN
VIETNAM'S AVIATION INDUSTRY
2
e-Conomy SEA 2018 - Southeast Asia's internet economy,
https://www.thinkwithgoogle.com/_qs/documents/6730/Report_e-Conomy_SEA_2018_by_Google_Temasek_v.pdf
3
Resolution No. 52-NQ/TW on “Guidelines and policies to actively participate in the 4IR”. Directive 01/CT-TTg on "Promoting the development of digital
technology in Vietnam". Decision No. 749/QD-TTg on "the National digital transformation program to 2025 with orientation to 2030".
Decision No. 411/QD-TTg on "the National strategy to develop the digital economy and society to 2025, with a vision to 2030".
Digital transformation trends
in the Aviation industry
From our interviews with the Civil Aviation Authority of Vietnam (CAAV), these digital
transformation trends will shape the aviation industry in the coming years:

Increasing customer-centricity with Artificial

Intelligence (AI) to:
● Analyze emotions on social networks
● Help airlines understand customer
behaviour and reactions
● Personalize ads to boost sales and
cross-sell opportunities

Leveraging customer data with IoT and Data

Analytics to:
● Enhance communication
● Develop products
● Provide solutions
DIGITAL
TRANSFORMATION
TRENDS Reducing costs and improving efficiency with
Augmented Reality/Virtual Reality (AR/VR) and
robotic staff:
● Reduce training costs through virtual
reality training
● Enhance the in-flight entertainment
experience

Improving customer satisfaction and security

with biometrics:
● Immigration formalities and in-flight
payments are more secure
● Use of biometrics to detect the
emotional state of passengers to help
airlines improve customer service
State policies
Vietnam’s Ministry of Transport has issued regulations4 to guide the digital
transformation process for the next five years and beyond. The Department has
outlined the "Digital Transformation Plan of the Civil Aviation Authority of Vietnam
(CAAV) from 2025 to 2030”5, identifying 4 key priorities:

01. 02.
Creating a shared database Developing and enhancing the
system. hardware infrastructure system
for cloud-based applications

03. 04.
Enabling the management of Improving the legal framework
digital transport infrastructure, for the management and
registering and managing air implementation of digital
vehicles through digital records transformation initiatives6.

From our interviews with airline stakeholders, we learned that

airlines value a close, collaborative relationship with CAAV in their
digital transformation journey

4
Decision No. 2097/QD-BGTVT on “The E-Government Architecture for the Ministry of Transport (version 2.0)”. . Decision No. 2434/QD-BGTVT on “The
Plan for IT application, the development of a digital government, and the assurance of network information security within the Ministry of Transport for
the period of 2021-2025”.
5
Decision No. 1868/QD-CHK on “Guidelines for Assessing and Reporting the Condition of Runways at Airports and Aerodromes in Vietnam”.
6
Decision No. 2269/QD-BGTVT on “Guidance on the Digital Transformation Program of the Ministry of Transport until 2025, with a forward-looking
orientation towards 2030”.
BOTTLENECKS IN THE DIGITAL
TRANSFORMATION OF AIRLINES
IN VIETNAM

The digital transformation landscape within Vietnam's

aviation sector presents both opportunities and challenges.
In this section, we delve into some of the bottlenecks that
could hinder the progress of this pivotal journey.
Air cargo
The air cargo industry has lagged behind in digital innovations for some time. The
International Air Transport Association (IATA) is working towards the complete
digitalization of information and data in the cargo industry through ONE Record – an
international standard for data sharing to create a single record view of the
shipment.

Optimizing transport through

increased automation.

According to the
CAAV, new digital
transformation trends Simplifying procedures and
minimizing costs at state
are shaping the future
agencies
of air cargo
transportation:
Replacing paperwork with
digital workflows in business
administrative tasks.

However, there remain several challenges to progressing digitalization of air cargo in

Vietnam:

● Digital talent scarcity: a scarcity of key skilled professionals, namely data

scientists, developers, and IT architects

● Fragmented data storage: abundant data is stored but not easily

accessible

● Resistance to change when it comes to altering organizational structure,

functions and workflows.
Modern retailing
There are emerging trends in customer behavior when searching for air flights7,
which expose local airlines to several retailing challenges today:

● Consumers are choosing multichannel buying experiences

■ Switch swiftly between online and offline platforms.

■ More open to retailers who can best facilitate these

transitions .

● Customers expect a seamless experience

■ Favor a shopping experience in which they can easily save

their booking preferences, manage flight changes or add
ancillary services.

■ Desire an integrated, omnichannel experience that provides

relevant content and recommendations targeted towards
their preferences across all touchpoints.

● Airlines are still experimenting with how to leverage existing

technologies effectively

■ Must hasten their adoption of modern technology and best

practices in modern retailing to meet customer needs.

■ Must encourage a culture that embraces changes, risk-taking

and innovations to fail fast, learn faster and adapt rapidly to
reach success.

7
IBS Retail Transformation Roadmap, https://www.ibsplc.com/e-books/airline-passenger/airline-retail-transformation-roadmap
Loyalty programs &
Personalization
Passengers are increasingly inclined to:

Rely on online tools to research, design and manage their travel plans

Be influenced by the reviews shared by fellow travelers and influencers

digitally

While promotions do help win new customers, airlines need to personalize the
customer experience to retain them for the long term. Personalization requires
airlines to constantly adapt to new trends and leverage technology to meet diverse
and evolving customer needs8. This goes hand-in-hand with improving the quality of
loyalty programs, which are implemented widely by Vietnamese airlines to build and
retain a loyal customer base9.

Airlines need to make adjustments to their loyalty programs and make

them more enticing to meet customers’ expectations and requirements.

Airline mobile apps and websites should have more optimally designed
communication with users and be able to showcase the benefits of their
loyalty programs. This will help increase engagement levels.

Demands for a simpler process for mile redemptions persist and

airlines should grab the opportunities to ease customers’ difficulties
performing this on their mobile devices.

Airlines still possess the prospect of optimizing their redemption and

incentive systems. Coming up with more reasonable reward policies will
help solve frequent customers’ confusion and inconvenience effectively.

8
Tourism-personalizing trend – development premises and strategic recommendations, https://vjol.info.vn/index.php/JSTD/article/view/27220
9
Vietnam Airlines: Giữ vững vị thế hãng hàng không Quốc gia nhờ áp dụng thành công CRM,
https://bizfly.vn/ung-dung-thuc-te/vietnam-airlines-giu-vung-vi-the-hang-hang-khong-quoc-gia-nho-ap-dung-thanh-cong-crm.html
Flight & crew
operations
The current demand for air travel has surpassed the rate of capacity expansion.
However, there remain several challenges regarding the supply chain, staff retention,
and the implementation of new technology.

Supply chain disruption

Supply chains are undergoing changes to address vulnerabilities resulting
from existing geopolitical conflicts and the difficulties encountered amidst
the COVID-19 pandemic.

The aviation sector has been directly affected by disruptions in the supply
chain of aircraft components. It is an unresolved issue adversely affecting
the timely delivery of new aircraft and the capacity of airlines to retain and
utilize their current fleets.

THE AIRLINE INDUSTRY REQUIRES MORE AGILITY THAN EVER BEFORE10

Rapid Growth and Evolving …compounded by Increasing

competition in Air Traffic Complexities
Global number of aircrafts
Massive Fixed Cost Structure

22,950 46,720 Costly Crew Shortages

+200%
2020 2040
Weather and Air Traffic Congestion

Volatile Fuel and Labor Costs

Results in Operational Failure and Increased Need

for Flexible Solutions

16% 71% $25B-35B

of flights experienced of delays are caused Expected annual
delays in 2021 by operational costs to airlines due
inefficiencies* to flight disruptions in
2022
*Note: Delays caused by operational inefficiencies calculated by summing Air Carrier Delay and Aircraft Arriving Late in 2020,
excluding National Aviation System Delay, Security Delay, and Extreme Weather

10
Source: Airbus; IATA, in Available Seat Kilometers as of 2020; Bureau of Transportation Statistics; International Air Transport Association (IATA);
Digital Travel Summit APAC 2022
 Staff acquisition & retention
In 2022, Vietnam Airlines reported having a significant demand for talent
across all positions including pilots, flight attendants, digital
transformation experts, technical staff, equipment operators, and
mechanics, especially in the post-Covid context11.

Other airlines in Vietnam are also in high demand of highly skilled

personnel, especially IT specialists for the digital transformation
initiatives. However, current talent recruitment could only fulfil about 80%
of the airlines' needs due to the shortage of tech talent12. This was due to
the challenging and demanding nature of the work, as well as the modest
level of income compared to other industries.

Technological development
The classic “build vs. buy" challenge in developing new technologies for
airlines has become increasingly complex, due to the heightened
intricacies, costs and ownership issues of creating new technologies
in-house compared to previous times13.
Furthermore, moving
from legacy systems Improving crew satisfaction and
Minimizing impact of disruptions morale
to more updated
technologies has not ● Reduction in delays ● Improvement in crew
● Reduction in cancellations availability
been easy for an ● Freeing up crew managers’
time and effort
industry with such
AIRLINE
complex information OPERATIONS
Improving operational Increasing IT flexibility and
systems. The effectiveness reducing costs

business- and ● Reduction in fuel costs ● Reduction in costs

● Revenue increase through
mission-critical improved load capacity
systems of airline
operations
encompass
substantial chunks of maintenance and repair operations, irregular
operations (IROPS) management, passenger service systems, and day of
operations and crew management. Thus, the costs associated with
replacing vital business technologies will be a hefty investment for
airlines.
11
Nhu cầu nhân lực ngành hàng không tăng mạnh, https://laodong.vn/xa-hoi/nhu-cau-nhan-luc-nganh-hang-khong-tang-manh-1116094.ldo
12
Trở lực khi giữ chân nhân lực chất lượng cao, https://www.tinnhanhchungkhoan.vn/tro-luc-khi-giu-chan-nhan-luc-chat-luong-cao-post211435.html
13
Technology Trends in the Airline Industry,
https://www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/airline-tech-trends-2023.pdf
FLYING FORWARD: HARNESSING
DIGITAL INNOVATIONS TO
ADDRESS THE CHALLENGES

With the immense growth potential for air travel,

Vietnam’s airlines have been urged to accelerate
the digital transformation process to enhance
customer experience.

On a global scale, digital solutions are widely

available to tackle the issues outlined in the
previous sections. Vietnamese airlines are also
starting to adopt some of these global best
practices, but there is still a long journey ahead to
digital transformation.
Air cargo
The efficiency of 100% airline capability of ONE Record by January 2026 - to
air cargo 01 replace the many data standards used for transport
documents with a single record for every shipment.
operations must
be continually
Ensuring digital standards are in place to support the
enhanced, and global supply chain - Guidance has been finalized on
digitalization 02 tracking devices used to monitor the quality and accuracy
of conditions of time and temperature-sensitive goods
offers enormous being shipped across the world.
potential. IATA
Ensuring compliance and support for customs, trade
has outlined 3
goals in this
03 facilitation and other government processes that are
increasingly digitized.
respect:

Speaking at the IATA World Cargo Symposium, McKinsey & Company manager
Soufiane Daher claimed that AI and machine learning play a key role in the future of
the air cargo sector14. AI Technologies are integrated to revolutionize the air cargo
industry thanks to their potential in the optimization of routes and schedules, in
which AI-powered systems help make smarter decisions based on real-time data on
flight patterns and cargo demand. By using machine learning algorithms and IoT
technology, AI-based systems support tracking and monitoring cargo, and predict
maintenance schedules to minimize downtime.

Bamboo Airways recently had a meeting with IATA

and is actively studying ONE Record. The airline has
also launched its cargo service - Bamboo Airways
Cargo while other airlines have also begun to apply
software/system solutions to support the digital
transformation of their cargo services.

According to IBS Software's SVP and Head of Cargo & Logistics Solutions - Ashok
Rajan, ONE Record, has propelled technology solution providers into the forefront of
a new wave of air cargo innovation15. IATA's objective of enabling the sharing and
exchange of data across the air cargo industry via ONE Record by January 2026 has
the potential to revolutionize the sector.
14
AI and machine learning to enhance air cargo, https://www.aircargonews.net/iata-wcs/ai-and-machine-learning-to-enhance-air-cargo/
15
ONE Record, One Achievable Vision?, https://www.cargoforwarder.eu/2023/06/11/one-record-one-achievable-vision/
Modern retailing
IATA is redefining industry standards through the launch of the New Distribution
Capability (NDC) program, which became the first legacy system modernization
effort that moves airlines closer to the modern retail model. Enabled by NDC, ONE
Order is an initiative intended to simplify airline reservation, delivery, and accounting
systems. The objective is to remove inefficiencies witnessed in paper-based
processes and facilitate better communication between airlines’ Order Management,
Revenue Accounting, and delivery providers.

IBS Software’s recent e-book on “The Future of Retail”16 highlights the 5 critical
checkpoints for implementing modern retail transformation programs:

01. 02. 03.

Set clear short Examine current Assess current
and long-term processes and data and
objectives. personnel. systems.

05. 04.
Engage and train Define the next
the stakeholders step.
early.

Vietnam Airlines has joined forces with Visa to elevate the customer
experience throughout the entire travel journey while also enhancing the
airline's digital capabilities. "This collaboration with Visa marks a
significant milestone in Vietnam Airlines' digital transformation journey,
encompassing not only operations, services, and customer care, but also
the establishment of a comprehensive and successful digital
ecosystem," assessed Nguyen Sy Thanh, Director of Vietnam Airlines.

16
Airline Retail Transformation Roadmap, https://www2.ibsplc.com/pss-airline-retail-transformation-roadmap.html
Loyalty programs &
Personalization
Spurred by a rapidly changing digital
landscape and dynamic market context,
expectations from loyalty programs
have changed for both business and
leisure travellers. While loyalty played a
crucial role in helping airlines weather
the pandemic, there are new realities
airlines should consider fulfilling
member expectations moving forward.
■ Local travellers expect smarter,
more intuitive and proactive
interaction that provides them
with greater autonomy in
decision-making
■ As new traveller segments
emerge, the relevance of loyalty
benefits must align with each
group’s expectations
■ Expanding travel and non-travel
earn and burn opportunities to
create more value for members
■ The ability to leverage data to
generate personalized offers in
real-time
Thus, AI and big data emerge as
creative solutions to enhance
personalization and the overall
effectiveness of loyalty programs. The
power of AI, big data and machine
learning can help in the following ways:
■ Gain insights into customers'
preferences and behaviours
■ Offer tailored products and
services
■ Predict traveller demands better

Airline loyalty management platforms are evolving fast as business models change.
There are different value drivers to consider such as cash generation, ancillary
revenues, cross-branding, cross-marketing and cross-sales programs with partners,
among others. Highly configurable and scalable technology can help identify and
optimize these value drivers. Its flexible and open set-up enables easy partner
integration and agility to quickly launch, test, monitor, and adapt innovative offers to
market.

More recently, Bamboo Airways has upgraded its

loyalty program by adopting IBS iFly Loyalty to delight
their Bamboo club members and provide their 20
million passengers and 1.6 million members with
excellent customer experiences.
Flight & crew
operations
The CAAV consistently emphasizes AI and data-driven solutions drive smart
aligning digital transformation efforts Ops Control Centres collaboration
with the operational requirements of through a real-time view of all
airlines, while recognizing the operational indicators, from planning to
importance of effective data post-flight, all from one single interface.
management - which are encouraged to Early warning indicators flag potential
transition to cloud-based solutions. irregular operations and automate
Thus, significant demand exists for proactive and cost-aware disruption
database construction, particularly in management.
the aircraft, aircraft operator, and airline As an example, to tackle staffing
transport infrastructure sectors. challenges, a leading European airline17
Digital technology now covers the full has successfully replaced its crew
spectrum from fleet planning to crew member allocation and deployment
optimization and tracking. Through platform with support from the new
real-time dynamic situational awareness Crew Management System that helps
and process automation, it generates improve operational effectiveness and
unmatched efficiency, cost-savings, and minimize IT costs.
productivity for airlines of all sizes and
business models.

Vietnam is taking the first initial steps towards this global trend of
tech-driven operational optimization. In their cooperation with IATA,
Bamboo Airways is planning the implementation of the Association’s
Intensive Training Program (IATA Professional Training) for its mid-level
management team to improve its management and operation
capacity18. Since May 2023, Vietjet has become the first airline to
cooperate with Airbus, which enables the Vietnamese airline to “make
the most informed decisions based on data”, including flight operations.
Vietnam Airlines has also started its journey of digitalization by
welcoming partnerships with innovative MRO software providers that
contribute to reducing costs and optimizing fleet flows.

17
Bamboo Airways Tăng Cường Hợp Tác Với IATA, Nâng Cao Chất Lượng Dịch Vụ Và Nghiệp Vụ Nhân Lực,
https://www.bambooairways.com/vn/vi/bamboo-airways/news/bamboo-airways-tang-cuong-hop-tac-voi-iata-nang-cao-chat-luong-dich-vu-va-nghiep-v
u-nhan-luc
18
Lufthansa Cargo Celebrates 10 Years of Transforming Core Cargo Business with IBS Software,
https://www.ibsplc.com/news/lufthansa-cargo-celebrates-10-years-of-transforming-core-cargo-business-with-ibs-software
Improving customer experience
through personalized and
self-service convenience
Timely updates and flight change notifications
■ Opportunities exist for airlines to improve their notifying system, which is
needed to avoid causing confusion and frustration for their customers.
■ Passengers should be assisted optimally by being notified of delays and
rescheduling of boarding time on their mobile devices punctually, which
allows them sufficient time to prepare for timely resorts.
Airline apps can be improved to enhance user-friendliness:
■ UI and UX
◻ A cohesive design in the interface
◻ Clear information and instructions
◻ Important details are displayed prominently
■ Expanded functionality
◻ Passenger itineraries with real-time updates
◻ Options on flight delays or cancellations to guests as soon as
they receive notifications
◻ Customer service support
◻ Airport activity

Self-service convenience
■ Self-service options will come with greater flexibility and convenience,
shortening passengers’ waiting time.
■ Develop and enhance paperless procedures for a smoother travel
experience.

For example, Vietnam Airlines uses AI for customer data

analysis and service improvements. The airline was the first
in Vietnam to make online check-in services available across
the entire domestic airport network19. It aims to be Vietnam’s
first digital airline by 2025 with three key factors: digital
technology, digital data, and digital culture.

19
A digital metamorphosis, https://heritagevietnamairlines.com/en/a-digital-metamorphosis/
 The process of digital transformation requires
patience, discipline and an organizational culture that
is led by example from the top-level managers.
Throughout each stage, digital transformation has the
potential to bring about positive changes in an airline's
operations and service delivery.

TOWARDS A
SUSTAINABLE FUTURE
 01.
The ability to craft a clear strategy
focused on business value.

02.
A strong talent bench with in-house
engineers.
According to
McKinsey20, there are 03.
six capabilities critical An operating model that can scale.
for successful digital
transformation: 04.
Distributed technology that allows
teams to innovate independently.

05.
Access to data that teams can use as
needed.

06.
Strong adoption and change
management.

As an organization progresses, it is crucial to establish achievable and quantifiable

goals and objectives. The goal should be to build a competitive edge by
continuously deploying tech at scale to enhance customer experience and reduce
costs. Digital transformation is a continuing process to rewire how an organization
continuously improves and evolves.

20
What is digital transformation, https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-digital-transformation
Conclusion
In today's aviation industry, digital solutions are readily available to revolutionize the
operational landscape of travel companies. These solutions offer next-generation
products that expedite growth, boost efficiency, and create distinct customer
experiences.

Software as a Service (SaaS) solutions hosted on the cloud can streamline and
automate the most critical functions of travel companies. They can be implemented
quickly and cost-effectively, allowing airlines to achieve the expected return on
investment promptly.

With the support from technology providers, airlines in Vietnam can embark on their
digital transformation journey with greater confidence. This, in turn, will foster
innovation and usher in a new era of technology-driven advancements.

“Conditions change quickly and customers

can be fickle. However, staying consistent
in building trust and loyalty is a key pillar to
staying ahead of the competition and
remaining top of mind among customers.

Thankfully, there is no shortage of

cutting-edge solutions and next-gen
technology and tools. IBS Software strives
to collaborate with Vietnamese airlines,
offering a range of services including
loyalty management solutions, flight
operations optimization, modern retailing and crew management among others. Our
goal is to support airlines in Vietnam in their pursuit of innovation and business
transformation, propelling them towards higher levels of success in the future.”

Best regards,

Glen Oliveiro
Director, Sales, Asia Pacific
IBS Software
About
IBS Software is a leading SaaS solutions provider to the travel industry globally,
managing mission-critical operations for customers in the aviation, tour & cruise and
energy resources industries. IBS Software's solutions for the aviation industry cover
fleet & crew operations, aircraft maintenance, passenger services, loyalty programs,
staff travel and air cargo management. IBS Software also runs a real-time B2B and
B2C distribution platform providing hotel room inventory, rates and availability to a
global network of hospitality companies and channels. For the tour and cruise
industry, IBS provides a comprehensive, customer-centric, digital platform that
covers onshore, online and on-board solutions. Across the energy & resources
industry, we provide logistics management solutions that cover logistics planning,
operations & accommodation management. The Consulting and Digital
Transformation (CDx) business focuses on driving digital transformation initiatives
of its customers, leveraging its domain knowledge, digital technologies and
engineering excellence. IBS Software operates from 16 offices across the world.

Further information can be found at: www.ibsplc.com

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