Vietnam is a developing country so low-cost airlines are chosen by many people and are willing to pay more.
LCC model is very suitable for income and consumption habits of Vietnamese people. In addition, the market share of LCC is still low (56%) lower than many countries in the region (Philippines (70%), Thailand (67%), Malaysia (66%), India ( 63%)) therefore, Vietjet's domestic market share may continue to increase in the coming years. In addition to Vietjet following LCC model, Jetstar is also a low-cost airline operating in Vietnam, however with a small fleet size ( only 17 units) and are facing financial difficulties, scalability therefore competition of Jetstar with Vietjet is quite low. There are reasons why Vietjet Air comes later but is
surpassing Vietnam Airline in 2017 .
Tourism industry with the international & domestic visitors increased sharply Vietnam is an attractive destination for international travelers. With the number of visitors to Vietnam in 2018 over 15.5 million, up 19.9% compared to 2017 (12.9 million) and 80 million domestic tourists, the total revenue from tourists in 2018 brought to Vietnam is over VND 620,000 billion. Moreover, in the first 4 months of 2019, the number of visitors increased by 7.6% (nearly 6 million visitors).
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Thanks to the visa easing policies of developed countries for Vietnamese citizens and the open sky policy in Southeast Asia region, the number of Vietnamese tourist traveling abroad has increased for the last five years , recorded an average annual growth of 20%. Last year, nearly 10 million local tourists visited abroad.
The popular destinations such as China, Korea, Taiwan, Thailand, Japan ... then further destinations such as Western Europe and North America ... This will be a large market for Vietjet to exploit. Currently, Vietjet has operated flights to South Korea, Taiwan, Japan, China, Malaysia, Thailand, Cambodia ... and is preparing to operate direct flights to the US and Australia. All of them are in the top 10 most potential markets to help Vietnam's tourism industry grow fast.
The Vietnamese government has policies to support the private companies In the past, aviation was always considered as one of the exclusive and spearhead sectors of the Vietnamese government however in recent years, with the policy of national integration and development, the Vietnamese government has allowed the private companies that meet economic conditions and management capacity can establish airline companies. Furthermore, the state will support to infrastructure development companies, ensure flight safety& support loans with low interest rate.
Interlines and share codes
The domestic and world aviation industry is entering a new development cycle.
Vietnam is a destination for many foreign airlines, some of which may benefit the domestic market. Foreign airlines are looking for more links in the Vietnamese market but there are few options (Vietnam airlines or Vietjet Air). Moreover, Vietjet is currently very interested in two-way joint venture and has plans to build and connect the global flight network through interlines, share codes with other airlines. This way will help Vietjet passengers to fly to almost all countries in the
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world. Joint venture ticketing method will help Vietjet expand its network out of East Asia. In the near future, Vietjet plans to mount all small fleets and believe that it can sell tickets on long-haul routes operated by other airlines. The development of joint-venture ticket export model will help Vietjet diversify its revenue sources as well as improve productivity.
THREATS
Domestic and international competitors
From early 2019, Vietnam aviation market continuously received positive
informations such as the Bamboo Airways airline officially operated commercial flights, Vietravel Tourism Company announced the establishment of an airline - Vietravel Airlines. In particular, the Vietnam Aviation Administration has just been granted a certificate of approval for air safety supervision capacity level 1 (CAT 1) from the US Federal Aviation Administration to allow Vietnamese
aviation enterprises to exploit flight routes. straight to the US. This forecasted that the aviation market will be more volatile in the coming time, airlines will have to compete more strongly to gain market share while passengers will be the first beneficiaries of the quality of service and fare. This poses a huge challenge for Vietjet that it must take proper strategy, wise and sensitive to the market to maintain its position and increase profit. Vietjet's market size is growing, so Vietjet's competitors are not only within the limits of domestic airlines but also international low-cost airlines like Air Asia , Lion Air and Tiger Air which are considered the power trio in Southeast Asia's low-cost aviation segment (emerging after the economic recession). In the price storm, the arrival of low-cost airlines has made many big bosses in the world look and accept that they are not small competitors. Today's network of airlines is gradually covering the globe. And there's no denying the fact that some Southeast Asian low-cost airlines have
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shocked the world with their "coverage" density in the international arena.
Although in the domestic market of Vietnam, AirAsia and Lion are nothing, but in Southeast Asia and international markets, Vietjet is definitely not equal to the above two brands. Currently Air Asia operates many direct flights from Vietnam to cities in Malaysia, the Philippines and Thailand. However, establishing a low-cost carrier in Vietnam is still the ambition of Air Asia for more than ten years due to factors such as favorable geographical position, development and growth potential of the market. The joint venture with Gumin-Hai Au was officially failed on April 18, 2019, marking the fourth defeat in an effort to establish AirAsia's low-cost airline joint venture in Vietnam.
Every day Vietjet's passing is always a harsh battle of brainstorming, how can Vietjet expand its flight to international, increase domestic market share and earn profit while its opponents are too strong and it is so impressive.
Overloaded airports
Currently in Vietnam there are a total of 22 airports with civil flight activities, including 11 international airports. The story of Tan Son Nhat Airport in Ho Chi Minh City is overloaded that everyone knows. Tan Son Nhat has been expanded and upgraded to serve 40 million passengers, but still not enough. To solve the problem, many airlines have to leave their airplanes at airports in other cities. Of course, this method of defense has many disadvantages, flights originating from local airports will be less profitable and difficult to hire a flight attendants.
Vietnam is planning to open a new airport in Long Thanh, Dong Nai with a design that can serve an average of 100 million passengers, but the project is still only on paper and does not know when it will ever be completed. Currently, Vietnam is expanding airports in central cities such as Hanoi, Da Nang, Nha Trang, Hai Phong and Quang Ninh to share the burden for Ho Chi Minh City. However, even so, the
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limited infrastructure in Ho Chi Minh City, the big city and the most important trade hub in Vietnam and the region will adversely affect Vietjet's development ability. This is also one of the causes of delay or cancellation of low-cost airlines.
Order too many planes
One of the biggest concerns at this time of VietJet is the order of a large number of upcoming aircraft, including more than 100 Airbus A320 aircraft and 100 Boeing Max 737 aircraft.
This is a rare combination of orders of low-cost airlines. Vietjet is on track to develop the international market and will receive more than 200 aircraft to keep its growth momentum. But this is not an easy task in the fierce market as Asia Pacific.
Challenges await VietJet in the next step, when the company moves to regional and international levels. Here, VietJet's small fleet is hard to compete with well-known companies in the markets like Malaysia, Thailand, Indo, Russia or China ...
Mr. Sobie predicted that the Vietnamese market will start to slow down while developing the global market is more difficult. At that time, everyone had the right to doubt VietJet's ability to maintain the current growth rate. Founder and CEO of VietJet - Ms. Nguyen Thi Phuong Thao is planning to develop business in China, Australia and Russia, where she has studied and worked. The first female
billionaire in Vietnam has rejected concerns about excessive competition despite the fact that Chinese domestic airlines are booming. Since airline regulations have not been removed in 2013, there are more than 10 new airlines appearing in this country. In an interview with Reuters, Madam Thao said that other countries are still cooperating with China and VietJet has its own advantages in the deal.
Vietnam's No. 1 private airline can cooperate with Chinese domestic partners to expand the market here.
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Rising fuel prices
The fluctuation of gasoline prices has now become a concern for the aviation industry, especially low-cost airlines when input materials account for 40% -50%
of the cost structure of enterprises. Entering 2018, the world oil price has recently increased sharply after the statements of US President Donald Trump about the possibility of withdrawing from the nuclear agreement with Iran. Vietnamese airlines use Jet A1 - gasoline for their flights. Overall cost of Jet - A1 gasoline is difficult to control and forecast. Fuel prices tend to rise again from 2016 according to oil price fluctuations. Low-Cost airlines like Vietjet will be affected by the increase in fuel prices larger than normal airlines due to the proportion of fuel costs on the proportion of large operating expenses (Vietjet accounts for 41- 46%, Vietnam Airlines accounts for 25-30%)
S-Strengths
1. VietJet has quickly captured significant domestic market share over the years
2.Vietjet has a strong financial potential.
3.The aircrafts are mobilized at high efficiency and good fill rate
4.Vietjet takes pride in owning a new, modern,
environmentally friendly fleet and operating cost per unit of product in the lowest of Asia as well as the world
5.Good ancillary revenue
6.Vietjet has built a strong brand in Vietnam
7.The creativity, youthfulness and newness of Vietjet's staff and the strategic vision of the leadership team.
W-Weaknesses
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O-Opportunities
1.The positive policies of Vietnamese government to support the private companies
2.Interlines and share codes
3.Tourism industry with the international & domestic visitors increased sharply
4.Low-cost model is suitable with Vietnam 5.Vietnam is one of the most attractive aviation
markets and the fastest growing markets in the world.
T-Threats
Looking back on 8 years of operation, besides fierce competition with domestic airlines and other international brands such as Air Asia, Lion, Jestar ...Vietjet Air is gradually asserting its position in the market. Vietjet Air's success is primarily in wise brand positioning. The aviation market was formerly exclusive to Vietnam Airlines with the image of traditional golden lotus, which is both a difficult and a challenge for other airlines to enter. Like blowing a new wind into this potential market, instead of looking at traditional luxury images like Vietnam Airlines, Vietjet Air brings a young, dynamic and fresh image, suitable for mid-range
customers. Madam Thao is also very sensitive to the market trend when constantly innovating in her way of thinking and not hesitate to use the latest utilities and technologies to serve customers comprehensively. Continue the philosophy of serving Thao's masses: "I built VietJet not only to provide cheaper fares for
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income customers but also to provide them with a high standard Skyboss
experience." Nguyen Thi Phuong Thao's 4P strategy is also very clear as follows:
Product
Vietjet Air is a low-cost airline and its core product are air transport service,
namely cheap airfare. Vietjet's motto is to create more opportunities to fly at lower costs for domestic residents and tourists to Vietnam. Vietjet's product focus on young people, dynamic customer segments and first-time go to aircrafts, medium-income earners. Customers who are proficient in technology and Internet such as smartphones, email, social networks, online payment forms: visa, master card, ...
and have a hobby of exploring and traveling regularly with spending proper charge. Vietjet's customer groups are mostly people who like to innovate, create, like to connect ...With the slogan "Enjoy Flying", Vietjet gives passengers the experience of cheap flights, 0d flights with good service, a young, dynamic hostess team, bringing to passengers many interesting and fun things on flights.Vietjet also affirmed that its low-cost product are not completely of inferior quality.,
Vietjet Air is quite diverse and different in the market. Besides providing cheap fares to serve customers, Vietjet also provides Sky Boss service with higher quality or Vietjet Travel Insurance service. Vietjet's products are present in almost all provinces of Vietnam and expand abroad such as Kuala Lumpuar, Singapore, Korea, Japan, China ... Now travel by air becomes more close & easy for
passengers by low-fare and flexible policy . Beside that with an ancillary service that gives customers the full experiences and comfort in flight.
Price
Low fares are a particularly competitive way for Vietjet Air to attract customers.
To do this, Vietjet must optimize its operating costs. Vietjet Air currently operates
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only the narrow body aircraft line A320 and A321 Neo .This is a line of aircraft specializing in serving short routes (5-6 hours flight), which helps Vietjet Air turn around in the day, reduce operating costs and accommodation costs for the fleet.
This type of aircraft is also the most advanced with a young age (2,82 years), which helps Vietjet save the maximum cost of gasoline (15%). In addition, Vietjet Air has cut down on baggage expenses, entertainment services, and skipped
meals. Instead, luggage, eating and drinking become passenger services that pay separately according to needs. In return, instead of the meals calculated in the fare with only 1-2 choices, Vietjet menu has 9 hot dishes that suit the taste of many customers. Moreover, in order to reduce operating costs, Vietjet also cut ticketing agents but instead encouraged customers to buy tickets online by placing more promotions exclusively for this group. There is no need to pay staff salaries, no extra costs to maintain the ticket office, not to print hard tickets, only ticket codes and flight details that customers can also print themselves.
Promotion
"Sexy" airline has a lot of impressive PR events. Remember in 2013, when Vietjet Air invited Ngoc Trinh (bikini queen in Vietnam) and models of Venus company with long legs that were extremely hot and sexy, wearing a bikini with the brand's logo and colors posing on the plane has created the attraction and interest of
netizens whether it is compliment or reprimand. Vietjet understands that both men and women are hard to resist watching the beautiful hostesses dressed in bikini swayed to the glamorous music. This makes Vietjet Air's brand identity in
Vietnam up to 98% (CAPA). Continue with bikini airline images in the new 2018 calendar, VietJet Air still pursues images of bikini models. In particular, including supermodel Celine Farach, 20, is "storming" with the name "The hottest girl in the social network" and supermodel Minh Tu - runner-up Asia Next Top model 2016.
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Recently, Vietjet has shocked the community in bringing models on the flight to welcome the national football team U23 Vietnam. Many people believe that this is a cheap PR, not suitable for a solemn event. Whether love or hate, we cannot deny Vietjet's popularity and success. Dream of flying for Vietnamese people" that Vietjet aspires to is a beautiful dream in Vietnam market with a growing middle class .A series of promotion programs such as 0 VND, 99K, 199K ticket hunting at golden hour frame as 12h-14h, 0h ...Get to know the trend of social networking is rising, mainly in young users,Vietjet Air integrates deep into Zalo so that users can book tickets, check-in, track schedules quickly and efficiently. This is also one of the factors that brought about the boom of Vietjet in the past year.
Branding thanks to scandal , indeed only Vietjet can do these things it but it must also be thanks to a great contribution of smart pricing strategy and foresight . I think it's a right marketing strategy for Vietjet but it should only be a temporary strategy if Vietjet does not want to be in a wave of boycott. Images need more civilization, flight services need more professional than what Vietjet needs now because their brand identity is more than enough. Anyway, I would like to send a sincere thanks to Vietjet because thanks to them, the dream of "flying high and far" of Vietnamese people has become easier!
Place
In recent years, Vietjet's international network development strategy has been promoted to increase the collection of foreign currency from the sale of tickets, duty-free goods and above all, the advantage of international fuel prices 30%
lower than domestic because of not having to pay import taxes and environmental fees like in Vietnam. This type of cost accounts for the largest proportion in the revenue structure of airlines.
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In 2018, the total of 118,923 flights were made on 105 routes including 39 domestic and 66 international destinations, covering all destinations in Vietnam and internationally as Japan, Hong Kong, Singapore, China, South Korea ,
Taiwan, Thailand, Myanmar, Malaysia, Cambodia ... Vietjet's aircafts also operate at Dubai, Doha airports. The coefficient of using seats reaches over 88.06%,
technical reliability reaches 99.64%. On time rate (OTP) reached 84.2%.
To do this, Vietjet is studying the possibility of using aircraft lines for longer journey, mainly focusing on Southeast Asia such as China, Indonesia ...Vietjet Air is working with retail companies (like Walmart) to diversify ancillary business goods. For long international flights (over 12 hours), Vietjet Air signed with Japan Airlines and is discussing with Korean and American airlines. Estimated in 2019, Vietjet will open routes to the US and operate routes to Australia. Vietjet wants to participate in this segment, will have to find ways to differentiate the service, to make up for the expensive things like providing services to local airports in San Jose or Orange County, California, Sydney .. where there are a large number of Vietnamese people live.
4.3 Analysis results
Based on Vietjet's SWOT and 4P analysis results in 4.2 section. Here I will provide some marketing strategies for Vietjet as follows:
Product
Continue to develop ancillary service activities:
Catering: Diverse meals on flights ,
Entertainment service: Movie, Music, Game , Online Shopping
Preferred seat : Near the aisle, near the window, Sky Boss
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Baggage, Insurance, Shuttle service, Other services….
Need to check the necessary items and clean the aircraft carefully before passengers board the flight
Mobilize aircraft in a timely manner by linking with other firms to be more flexible in the lack of aircraft. If it is not possible to link, at least the
information system must be consistent and promptly notify customers as soon as possible when the flight is malfunctioning or canceled.
Try to minimize the situation of delays or cancel flights. Give anniversary gifts to customers when participating in each flight to add value to the feeling ..
Enhance trafficking for employees about attitude and ability to handle problems.
Price
Continue to pursue a competitive strategy with the lowest possible fare in the
Continue to pursue a competitive strategy with the lowest possible fare in the