國立高雄大學國際企業管理碩士學位學程
碩士論文
亷價航空行銷策略之研究:以越南越捷為例
A Study of Marketing Strategy for Low-Cost Carrier:
The Case of Vietjet Air in Vietnam
Student：Ha Thi Thu
Advisors：Po-Chih Lee , Ph.D
Yung-Kai Yang , Ph.D
I
Acknowledgement
In treasure of Vietnamese Literature has a deeply idiom: "Without a teacher you wouldn't be anything or couldn’t become anything".
First of all, I would like to express the deepest appreciation to my respected
advisor Dr. Po-Chih Lee for his dedicated guidances and valuable advices. Without his enthusiastic encouragement and persistent help, this dissertation would not have been possible. Insightful comments and helpful suggestions given by Dr. Po-Chih Lee has been a great help me in all the time of research and completed Master’s Thesis.
I would like also to extend my grateful thanks to all professors at IMBA program has been enthusiastically teaching practical useful business knowledges to us. My sincere thanks also to Director. Yung-Kai Yang, Prof. Chien-Hsing Wu and Prof. Pei-Chi Huang for their useful advices and timely recommendations in the
Proposal Report. I am really thanks Joanne who helped me take an opportunity to work as part-time assistant in IMBA office. She is always reminding and
supporting to me in any time.
I also thank to my lovely classmates. Without them it would not be possible to have a fun time such memorable in NUK.
Finally, I would like to thank to my dearest family : my parents, my husband for their unconditional love , encouragement and their financial support. I could not have done this thesis without them. Thank you God for your blessings to me and my family. For the strength you give me each day and for all the people around me who make meaningful life .
Ha Thi Thu June 14, 2019
II
A Study of Marketing Strategy for Low-Cost Carrier:
The Case of Vietjet Air in Vietnam
Advisors : Po-Chih Lee, Ph.D Yung-Kai Yang, Ph.D Student : Ha Thi Thu
International Master of Business Administration National University of Kaohsiung
ABSTRACT
Aviation has always been considered as one of the top priority section of the Vietnamese government in the country's economic development strategy. With a fast-growing economy and young population starting to travel more, Vietnam is expected to become one of the fastest growing aviation markets in the world with absolutely amazing figures in the next few years. The purpose of this study is to provide Airline Marketing Strategies for Low-Cost Carrier that based on a case of a Low- Cost Airline in Viet Nam - Vietjet Air. Joining the airline market since 2011, it took only 6 years to operate Vietjet Air has officially surpassed elder brother "Vietnam Airline" with 60 years old in 2017 to become the leading airline in Vietnam. By using qualitative analysis: SWOT and 4P, I will in turn clarify the reasons why Vietjet can achieve admirable results in such a short time: because of knowing to seize the opportunity in time, the right choice of business model, having a strength of financial and deep relationships, specially the ingenious leadership of Mrs. Nguyen Thi Phuong Thao by the smart, unique, daring
marketing strategy. Here are the golden points for Vietjet's success in current time. Key words: Airline Marketing Strategy, Vietjet Air, SWOT, 4P Analysis
III
Abbreviation
LCCs Low-Cost Carriers
ICAO International Civil Aviation Organization
FTAs Free Trade Agreements
IATA International Air Transport Association FSCs Full-Service Carriers
OAG Official Aviation Guide
CAPA Centre for Aviation
IV
Contents of Thesis
Abstract………II List of Figures………....VI List of Table………...………...VII
Chapter One: Introduction……….………..…..……1
1.1 Background Information…..……….….….….1
1.2 Motivation & Objectives...…..………...3
1.3 Purpose of the Study…………..……….…….4
1.4 Research Procedure..………….……….…….4
Chapter Two: Literature Review ...……….7
2.1 The Definition of Low-Cost Carrier & LCC Business Model.…….……….…7
2.2 The Growth Period……….………….………9
2.3 Background of the LCC in Southeast Asia ..………14
2.4 SWOT, TOWS & 4P Analysis…..………19
Chapter Three: Research Method...………32
3.1 Qualitative Analysis..………32
3.2 Research Framework..………...33
Chapter Four: Major Findings..………..34
4.1 Brief Introduction of Vietjet………..34
4.2 SWOT & 4P Analysis……..………..40
4.3 Analysis results….……….63
V
5.1 Conclusions………...………66
5.2 Major Suggestions………….………69
5.3 Limitations of the Study………69
5.4 Future Study……….……….70
References………...……….71
VI
List of Fingures
Fingure 1.1: Flow Chart...6
Fingure 2.1: Number of seats of leading low cost airlines worldwide in 2018...10
Fingure 2.3: World's Best Long Haul Low-Cost Airlines 2018...12
Fingure 2.4: The penetration of LCC in Southeast Asia domestic market 2018...15
Fingure 2.5 : Number of Aircrafts of Southeast Asia LCC...16
Fingure 2.6 : Strategic planning model...20
Fingure 2.7: Components of Swot Analysis...22
Fingure 2.8: Swot Analysis templates...23
Fingure 2.11: Marketing Mix Diagram...29
Fingure 3.1: Research Framework...33
Fingure 4.1: Vietjet’s flight network 2018...35
Fingure 4.2 :Vietnam domestic market share %...36
Fingure 4.4: Vietjet's business results...40
Fingure 4.5: Domestic market share of airlines in Vietnam...42
Fingure 4.7: CASK and CASK ex-fuel (2017 & 2018)...45
Fingure 4.8: Air passenger traffic and Inbound tourism growth...50
Fingure 4.9: Vietnam GDP Growth Rate...51
Fingure 4.10: Rate of people flying...51
Fingure 4.11: The number of airlines in Southeast Asia region...52
VII
List of Tables
Table 2.9: Swot Matrix...24
Table 2.10: Tows Matrix...26
Table 4.3: Vietjet Air... 39
1
Chapter One: Introduction
1.1 Background Information
The global civil aviation sector has experienced nearly 100 years of
development in modern history (The International Civil Aviation Organization (ICAO) established in 1944). This is a vibrant and flourishing period where nations take turns, invest in infrastructure and equipment, professional quality fleets along with a strong financial potential, business strategy to develop themselves and the community. With the development of the civil aviation
industry around the world , Asia - Pacific's Civil Aviation has the highest growth rate and becoming an increasingly important aviation market and the most
noticeable.
Vietnam aviation market is a positive point in the bright picture together. Aviation is one of the top priority sectors for development by Vietnamese government as it is critical to the country’s economic growth. With the ASEAN Open Skies policy being in effect since January 2015 that allows airlines to fly freely throughout the ASEAN member state in a unified aviation market. Moreover, Vietnam join in several free trade agreements (FTAs), this makes the passenger and cargo air transportation in Vietnam will have more opportunities to grow. Specially, the Vietnamese government allowed private companies to be invest in airline sector that was previously considered a monopoly of state . Besides, there are policies to attract, support, minimize cumbersome administrative procedures, create
conditions for domestic and foreign private enterprises enter to the Vietnam
airline market easily.With a growing GDP and over 94 million people, Vietnam is considered by experts to be one of the hottest growing aviation markets in the world. The International Air Transport Association also estimated that between 2019 and 2020, passenger transportation in Vietnam is expected to rise by 16
2
percent, and from 2020 to 2030, by 8 percent. Cargo air transportation will
increase by around 18 percent until 2020, and 12 percent between 2020 and 2030. The growth will make Vietnam the world's fifth fastest-growing aviation market by 2035. Vietnam is also projected to be one of the fastest growing aviation
markets in Southeast Asia over the next 10-20 years. To get the positive signals as today, in recent years, an emerging brand of Viet Nam is known as to be a Low-Cost Carrier (LLC) or Bikini Airline , it's a first low-cost airline with 100% private capital .Vietjet is like a game changer , redistribution of sky and airline market share in Vietnam. With a young age, after only 6 years of operation, Vietjet Air surpassed the elder brothers as Vietnam Airline, Jestar Pacific to become a biggest airline in market share in 2017.
It can be said that to achieve the success of Vietjet as today is largely thanks to the leading of the female billionaire, CEO of Vietjet: Madam Nguyen Thi Phuong Thao, she and co-founders have developed very unique and daring marketing strategies. Building of Vietjet with a dynamic, youthful, sexy image and cheap price ticket which has made the level of brand recognition of Vietjet in Vietnam up to 98% (according to CAPA calculations). Learn valuable experiences from successful and failed brands in the airline industry around the world , from the aspect of investment, brand identity to image promotion, looking for business partners, Vietjet has adopted the Low-Cost business strategy model of Southwest Airline and Air Asia to run its own business. After a few years, Vietjet has also achieved considerable success. Based on the case of Vietjet, what is the
appropriate marketing strategy for low-cost airline industry? for private
companies want to establish a new brand ? How can survive , get profit, position in market and able to compete with older airlines in the industry .This is a problem
3
that will take away the enthusiasm of specialists, strategists and business leaders to offer the right marketing strategy.
1.2 Motivation & Objectives
Low-Cost Carrier (LCC) models have become familiar in North America and Western Europe. Since 1971, the first low-cost airline - US's Southwest Airlines has started exploiting this type of transport. Low-cost airline then quickly spread to Europe with the arrival of well-known brands Ryanair and EasyJet. The year of 2003 marked a new development in the Asian civil aviation industry when the Low-Cost Airline trend started to blossom, pioneering as Malaysia's Air Asia. Four years after Low-Cost Airline is present in Vietnam, the situation of air transport market has changed so much , the competition between more than 40 carriers has routes to Vietnam become more intense, especially is a market share competition among foreign Low-Cost Airlines operating in Vietnam. Under these
circumstances, domestic airlines could not help but jump in, starting with Jestar Pacific Airlines' transformation into a Low-Cost Airline in February 2007. Next is the Vietjet Air -Vietnam's private airline, established in December 2007 but it was not until the end of 2011, Vietjet has started the first commercial flight, has
triggered a new competition among domestic airlines. Not just stop there, the fact that a series of private airlines like AirAsia Phu Quoc Air, Saigon Air, Bamboo Airways, Vietstar Air are waiting to be licensed to operate is demonstrading that Low-Cost Airline will explode in Vietnam next time. It can be said that Low-Cost Airlines are a very timely issue of Vietnam's aviation industry, which is a good sign of the abolition of monopoly that Vietnam Airlines has held for a long time and demonstrating a new development up of the Vietnamese economy. Not only that, the fact that Vietnam’s Low-Cost airline products attracted the attention of many Vietnamese people, the average or lower income people could use the means
4
of fast and modern transportation is aircraft, however, most of them do not
understand what is the essence of low- cost airlines products? How is it different from traditional airlines products? Why are these companies selling at such low fare rates that can survive and grow so strongly? Which marketing strategies have these airlines used to make their success? Therefore, I chose the topic " Study of Marketing Strategy for Low-Cost Carrier : The case of Vietjet Air in Vietnam ", hoping that there will be a more specific look at Low-Cost Airline products and evaluation of development prospects of this product in Vietnam.
1.3 The Purpose of Study
This study is a qualitative analysis ; the main purpose of this study are as follows: 1. To understand airline industry in Vietnam
2. To investigate Low-Cost Carrier in Vietnam 3. To evaluate marketing strategy for Vietjet Air 4. To offer suggestions for Vietjet Air
1.4 Research Procedure
With Research Topic is : “ A Study of Marketing Strategy for Low-Cost Carrier Industry: The Case of Vietjet Air in Vietnam”. The research process consists of 5 main steps.
The first step is introduction of the airline industry of the world , the situation of
the airline business environment in Vietnam, namely Vietjet Air_Low-Cost
Carrier. From that point view, we will propose research problems: Why can Vietjet achieve admirable results in such a short time? What is Vietjet's marketing
strategy different from other airlines in Viet Nam ? Is this marketing strategy can applicable to the entire airline industry?
5
The second step is Literature Review. Reviewing the necessary background
knowledge related to research issues through previous quality journalism and research books. From there, select the content suitable for the research topic and then rewrite in your own way. Based on foundation of theories, we will analyze the Marketing strategy of Vietjet did and make the right conclusions and strategies for Vietjet and airlines industry .
The third step is Research Method. The related datas will be found out on the
official website of Vietjet, prestigious business magazines, speeches , experts assessment, Vietjet financial report ...will use for SWOT and 4P matrix analysis. SWOT includes analysis the strengths, weakness, opportunities, and threats of this strategic research. 4P or Marketing mix includes analysis about Product, Price, Place and Promotion.
The fourth step is Major Findings : Brief introduction of Vietjet and outline
qualitative results .
The last step is Concluding Remarks , after finishing analysis, we can draw key conclusions for Marketing strategy for Vietjet, the limitations of the study and future research proposals. Which do Vietjet's Marketing Strategies bring to real value to the entire airline industry and new brands in the future?
6
Fingure 1.1 Flow Chart
REFERENCES CONCLUDING REMARKS
Conclusions, Suggestions, Limitations and Study Future
MAJOR FINDINGS
Brief Case of Vietjet, Qualitative Analysis Results, Marketing strategy for Vietjet
RESEARCH METHODE
Research Framework, Outline Qualitative Analysis: SWOT, 4P
LITERATURE REVIEW INTRODUCTION
7
Chapter Two: Literature Review
2.1 The Definition of Low-Cost Carrier & LCC Business Model
The emergence of low-cost carriers has been a key catalyst for the development of the aviation industry in the last decade. There are various definitions that have been applied to describe the low-cost carrier ( Dietlin 2004; Kumar 2005; Doganis 2006; Hunter 2006; Holloway 2008). In essence the majority of researchers define LCCs as carriers, through a variety of operational processes, have achieved a cost advantage over full-service carriers (FSCs). A low-cost carrier will be defined as a carrier which translates these cost savings into lower , more affordable fares for the travelling public (World Bank Document, Ready for takeoff). Or according to Wikipedia definition : A Low-Cost Carrier or Low-Cost Airline (occasionally referred to as no-frills , budget or discount carrier, and abbreviated as LCC) is an airline that generally has lower fares and fewer comforts. To make up for revenue lost in decreased ticket prices, the airline may charge for extras like food, priority boarding, seat allocating, and baggage etc.
For any business, choosing the right business model is very important and the airline industry too. The business model will determine the way one intends to make money with the airline. There are many economic proposals, business strategy research for the airline industry and a lot of airline business models are presented. According to Airlinebasics.com , there are really 6 main airline business models which are being used by the majority of airlines around the world: Those are Legacy Airlines ( Full Service Carriers) , Low Cost Airlines (Low Cost Carriers), Charter Airlines (Holiday Carriers), Regional Airlines, Cargo Airlines ( Traditional Freight Carriers) and Hybrid Airlines. There are a number of key characteristics that can generally be found in LCCs as follows (IATA and World Bank Document)
8
1. The service offering focusing on the key service of transport and removal of all “frills” (for example, free baggage, on-board meals, assigned seating) or charging additional fees for them;
2. Primarily point - to - point operations, serving short-haul routes, often to/from regional or secondary airports lower airport charges, higher availability of slots, and reduced congestion .
3. High aircraft utilisation rates with short turnaround times between operations. 4. Low-cost distribution through online selling, a very high proportion of bookings made through the Internet.
5. A strong focus on price sensitive traffic, mostly leisure passengers. The fleet consisting of just one or two types of aircraft.
6. Different fares offered, related to aircraft load factors and/or length of time before departure.
7. The high labor utilization time through a higher number of average block hours per employee and/or higher passenger per employee ratio
Not all low-cost airlines do all of the above. However, here are the general characteristics that most low-cost airlines apply to themselves.
To put it simply, the business model of the low-cost carrier can be understood simply as follows: Travelers are very sensitive to cost, particularly for short flights. LLC can offer very low prices by eliminating unnecessary luxuries, like in-flight meals or business-class seating. Given the high level of congestion at most hubs, low-cost airlines can also take the less expensive late-night and early-morning. Some airlines actively advertise themselves as low-cost, budget, or discount airlines while maintaining products usually associated with traditional mainline
9
carrier's services which can increase operational complexity. These products include preferred or assigned seating, catering other items rather than basic
beverages, differentiated premium cabins, satellite or ground-based Wi-Fi internet, and in-flight audio and video entertainment. More recently, the term "Ultra Low-Cost Carrier" differentiates some low-cost carriers, particularly in North America where traditional airlines increasingly offer a similar service model to LCC. With the fluctuation of fuel prices & the global economic downturn created a thriving market for low-cost carriers pressuring more up-market airlines into looking for new strategies for differentiating their service. The airline industry is intensely competitive. This also means that low-cost airlines must always innovate, carefully prepare short-term and long-term strategies to cope with changes in the market and fierce competition among firms in the industry together.
2.2 The Growth Period
Over the past three decades, Low Cost Carriers (LCCs) have transformed the air travel market and created a revolution in air service (IATA) . In 2018, LCCs worldwide with the greatest number of seats accounted for about 31 percent of the world total scheduled passengers (Statistatic Portal 2019) . The global LCC has grown at a staggering pace since the beginning of this decade and now account for one third of intra-regional seat capacity.There are now more than 100 LCCs
operating a combined fleet of 6,000 aircraft. The LCC fleet has doubled in size since the end of 2009, when it consisted of only 2,900 aircraft (source: CAPA Fleet Database). Global LCC seat capacity has also doubled since 2009 (753 million) , reaching nearly 1.7 billion (1.564 billion) in 2018 (source OAG).
Asia Pacific region is now the world’s largest LCC market, where the LCC
penetration rate is now approaching the global average, accounting for nearly 600 million seats, or 35% of the global LCC seats in 2018. The Asia Pacific LCCs have
10
expanded from a fleet of only 400 aircraft at the end of 2009 to 1,900 aircraft currently and are poised for more rapid growth, given their massive order book of 2,400 aircraft (CAPA). Latin America has also experienced rapid LCC growth, while Africa's LCC growth has been relatively modest. LCC growth in the Middle East market has been rapid but the region's LCC penetration rate remains low. The more mature markets of Europe and North America have experienced slower LCC growth than the emerging markets, although there have been significant gains between the two regions.
Fingure 2.1: Number of seats of leading low cost airlines worldwide in 2018
Some Low-Cost Airlines that are well known include Southwest Airline, Ryanair, Easyjet, jetBlue, Air Asia and Wizz Air…. During this period , Southwest Airlines had the highest number of seats with 206.6 million in 2018 (Statista 2019) and become one of the LCC largest airline in the world . Based on figures from OAG
11
Schedules Analyser, the list of fastest-growing airlines was compiled by ranking the top 100 carriers in the world by available capacity during the first-half of 2018. The data was then compared to the capacity figure during the same period in 2017 and ordered by year-on-year percentage growth. In total, eight of the top ten carriers are low-cost.
Rank in top 100 Airline Capacity 2017 Capacity 2018 Growth (2018 / 2017) Low-Cost Rank 95 GoAir 5579888 7293240 30.7% 1 64 Frontier Airlines 9186800 11322970 23.3% 2 65 Spring Airlines 8870940 10930320 23.2% 3 92 Avianca Brasil 6178941 7512495 21.6% 4 39 Wizz Air 14118328 17153256 21.5% 5 71 Vietjet 8142058 10272500 20.7% 6 86 Citilink Indonesia 7066200 8462160 19.8% 7 93 Sriwijaya Air 6231042 7417310 19.0% 8 15 IndiGo 29115000 34581200 18.8% 9 37 Eurowings 14165648 17389909 18.5% 10 T
Table 2.2 : Top ten fastest-growing major airlines during H1 2018 AirAsia is the World's Best Low-Cost Airline for the 10th onsecutive years , the reason Air Asia is honored to receive this title is not only thanks to its cheap price, but also its quality and attitude towards its customers. From beginning of the fleet size has only two aircrafts , Air Asia now has hundreds of aircraft with a wide network of more than 100 destinations, serving tens of millions of passengers each year. Beside , Norwegian is the World's Best Long Haul Low-Cost Airline and the
12
Best Low-Cost Airline in Europe (Skytrax 2018). The quickly growing of VietJet Air out of Vietnam earned prize the Best Ultra-Low-Cost Carrier for the second year in a row ( Airlinerating 2019). Here are the 20 best low-cost airlines in the world, according to the results of the Skytrax survey.The Skytrax rankings are based on the impressions of 19.87 million travelers from 105 different countries. The survey, which covered more than 325 airlines, measured 49 parameters ranging from boarding procedures to seat comfort to the quality of service.
No World Low-Cost Airline Awards (Skytrax 2018) Name of LLC
1 World's Best Low-Cost Airlines 2018 Asia Air
2 World's Best Long Haul Low-Cost Airlines 2018 Norwegian
3 Best Low-Cost Airlines in Africa 2018 Mango
4 Best Low-Cost Airlines in Asia 2018 AirAsia
5 Best Low-Cost Airlines in Australia / Pacific 2018 Jetstar Airways
6 Best Low-Cost Airlines in Europe 2018 Norwegian
7 Best Low-Cost Airlines in the Middle East 2018 Flynas
8 Best Low-Cost Airlines in Central Asia / India 2018 IndiGo
9 Best Low-Cost Airlines in North America 2018 WestJet
10 Best Low-Cost Airlines in South America 2018 Sky Airline
11 Best Low-Cost Airline in Indonesia 2018 Citilink
12 Best Low-Cost Airline in the UK 2018 EasyJet
13 Best Low-Cost Airline in Germany 2018 Eurowings
14 Best Low-Cost Airline in France 2018 HOP
15 Best Low-Cost Airline in Mexico 2018 Interjet
16 Best Low-Cost Airline in Thailand 2018 Nok Air
17 Best Low-Cost Airline in Japan 2018 Peach
13
19 Best Low-Cost Airline in the USA 2018 Southwest Airlines
20 Best Low-Cost Airline in Spain 2018 Vueling Airlines
21 Best Low-Cost Airline in China 2018 West Air
Table 2.3: World’s Best Low-Cost Airlines 2018
Next, according to a new report published by Research and Market with titled, “Low Cost Airlines Market by Purpose, Destination and Distribution Channel: Global Opportunity Analysis and Industry Forecast,2017-2023,” the global Low-Cost airlines market was valued at $117,726 million in 2016, and is projected to reach $207,816 million in 2023, registering a CAGR of 8.6% from 2017 to 2023. The development of the travel & tourism sector fosters the growth of the Low-Cost ost airlines market. For instance, in Latvia, Europe, around 80% of the passengers are flown by low-cost carriers; whereas, in Africa, nearly half of the countries have no Low-Cost airline service. The LCC penetration rate in Asia will soon approach the global average and should be able to exceed the global average, given the dynamics of this market (with a rapidly expanding price sensitive mid-class population). With the overall growth rate, the Asian LCC market has many opportunities to grow faster than other regions. Market share gains in Africa and the Middle East are inevitable. Latin America's LCC penetration rate is already above the global average, but opportunities still beckon as several of the region’s markets remain unpenetrated. The growth of the market is attributed to the rise in economic activity, ease of travel, travel & tourism industry, urbanization, changes in lifestyle, consumers’ preference for low cost service along with non-stops, and frequent service, increase in purchasing power of middle class households especially in the developing regions, and high internet penetration coupled with e-literacy. Conversely, factors such as volatile crude oil price , increase in terrorism & crime rate, political uncertainty,
14
natural disasters and high investment & operational cost but low profitability are anticipated to be a major challenge of the low cost airlines industry.
2.3. Background of the LCC in Southeast Asia
Southeast Asia is a dynamic region consisting of 11 members located between the Indian Ocean and the Pacific Ocean. The area has long been known as a favorite place of the world for tourism, known for its beautiful tropical beaches, delicious food, low prices, and hospitable people with cultural backgrounds. A fairly safe environment for travelers and easy to travel through around the ASEAN countries. ASEAN Open Skies policy being in effect since January 2016, which is the
region’s long-awaited single aviation market, allows airlines to fly freely
throughout the ASEAN member states in a unified air transport market, which will facilitate trade and tourism, especially low-cost airlines, by shorter flight times (within 3 hours) .This ASEAN Open Skies policy has yielded positive growth in the aviation sector and it will attract a big number of tourists to arrive in the region, projected to hit 145 million tourists by 2023. Moreover, Southeast Asia airline market is one of the most powerful growth areas in the world, just behind the Middle East. This is an assessment made by the International Civil Aviation Organization. Thanks to the drop in airfare prices, many ASEAN people have the opportunity to travel, travel and trade in the region more easily. In the coming time, the market for cheap aviation in ASEAN will continue to grow strongly. The explosion of low-cost aviation has strongly stimulated the trend of air travel in many countries around the world, especially developing countries in Southeast Asia. The race to gain market share is becoming more and more fierce not only among low-cost airlines but also airlines that serve traditional forms cannot stand outside. One of the factors to increase the influence, occupying strong market share is the ability to own the number of airplanes of airlines. When the competition is
15
mainly based on the frequency of exploitation on the same route, amount of
aircraft , the ability to ensure the accuracy of the take-off / landing time higher, the brand's popularity will hold market share advantages.
Starting from zero since 2000, currently in Southeast Asia there are about 26 Low-Cost Airlines operating with flights to 10 countries in ASEAN region.In the five main domestic markets (Indonesia, Thailand, Vietnam, Malaysia and Philippines), LCCs account for at least 50% of the capacity. LCCs account for more than 70% of the domestic market in Thailand and nearly 70% in the Philippines.
Fingure 2.4.: The penetration of LCC in Southeast Asia domestic market 2018
The Southeast Asia fleet consists of more than 2,000 aircraft and has nearly as many aircrafts on order (Centerforaviation.com, Southeast Asia Airline 2019 Outlook). Lion Air Group is the largest airline group in Southeast Asia which has held the highest number of aircraft in the region since 2014, surpassing both AirAsia X and AirAsia combined. Lion Air of Indonesia is also the first choice of people from thousands of islands due to its wide network of flights with domestic flights and up to 36 points. Hold the 2nd position is AirAsia Aviation Group with
16
the fleet growth of 13% in 2018 , owning 211 aircraft. AirAsia X, the traditional non-service brand of this group, plans to increase its fleet to 30% for the three affiliated airlines operating in the region with the mainstream aircraft is A330. Besides, AirAsia with six other airlines are exploiting the routes in Southeast Asia using mainly the A320 series. After adding 17 aircraft to the fleet, Vietnam's leading low-cost carrier - Vietjet Air is ranked at the 3rd position in terms of the growth in the number of aircraft after Lion Air and AirAsia. However, in terms of the total number of existing aircraft according to the statistics as of January 2018 from CAPA, Vietjet has not been able to appear in the Top 10 .
Figure 2.5: Number of Aircrafts of Southeast Asia LCC
Southeast Asia has had a good growth story for several years. Seat capacity in Southeast Asia has more than doubled over the past decade, from slightly over 200 million seats in 2008 to close to 530 million seats in 2018, resulting in Southeast Asia’s LCC penetration rate increasing from less than 30% to nearly 50%. However, domestic growth in Southeast Asia has slowed significantly as the markets have started approaching saturation after several years of rapid growth
17
driven . Fares are already very low, and with a large portion of the population having already started to fly in recent years, the opportunity for more rapid domestic growth is limited. Indonesia, Thailand, Vietnam, Malaysia and Philippines are now experiencing faster international than domestic growth. All of the LCCs based in these markets have shifted their focus to international expansion. LCCs now account for 30% to 40% of the international seat capacity in Singapore, Indonesia, Thailand, Vietnam and the Philippines. In Malaysia LCCs account for a remarkable 50% of the market, giving it one of the highest
international penetration rates in the world. LCCs also now account for more than 30% of capacity in Singapore, which is Southeast Asia’s second largest
international market (after Thailand) but does not have a domestic market. LCCs account for nearly 30% of international seat capacity in the smaller markets of Cambodia and Myanmar. Even in tiny Brunei and Laos there is a decent LCC presence, with LCCs operating 15% and 22% respectively of international seat capacity.
According to the latest edition of IATA’s 20-Year Air Passenger Forecast, China will replace the US as the world’s largest aviation market (defined by traffic to, from and within the country) around 2024. Alright, Southeast Asia-China growth has been enormous . In particular, China has become a focal point for Southeast Asian LCCs (and to some extent FSCs) as Chinese visitor numbers to Southeast Asia have been increasing rapidly. There are now 12 Southeast Asian LCCs operating at least 20 weekly frequencies to China. AirAsia is the largest foreign airline group in China and Lion is the third largest. Southeast Asia-China seat capacity has quadrupled over the past seven years. LCC capacity has increased tenfold and FSC capacity has tripled. Over the past two years, LCC capacity in the Southeast Asia-China market has doubled and FSC capacity has increased by close
18
to a third. However, China can be a fickle market, with growth that is hardly linear. Chinese visitor numbers can suddenly contract, impacting Southeast. There are many other low-cost carriers in the region that have directly and indirectly contributed to the transformation of the aviation and tourism sectors in these ASEAN nations. Companies like Lion Air (Indonesia), Nok Air (Thailand) and Cebu Pacific Air (the Philippines) are the change-makers in Southeast Asia while traditional carriers have also jumped on the low-cost airline bandwagon through their subsidiaries like Scoot (Singapore Airlines) and Jetstar (Qantas).
Up to now, Vietnam has made amazing progress, there are innovations on the way of modernization. The wings of Vietnam now not only reaches most of domestic airports, but also reaches many continents in the world with modern airplanes. Airports have more passenger facilities, more terminals, runways, aprons are expanded. Vietnam currently has five commercial airlines, Vietnam Airlines, Vietjet Air, Jetstar Pacific, Vietnam Air Services Company (Vasco) and Bamboo Airways (New brand in Jan 2019) . AirAsia is also planning on entering the market through a joint venture with Hanoi-based Gumin Company Ltd and Hai Au
Aviation Joint Stock Company. AirAsia will own 30 percent in the venture, a subsidiary of Thien Minh Group, to establish a new Low- Cost Carrier.
Vietnam is considered one of the fastest growing aviation markets in the world , growing by 17.4 percent in the last decade . Which was driven by a rise in domestic and foreign travelers as well as the emergence of low-cost carriers. However, this rapid growth has started to put a strain on the airport infrastructure. The government has started to invest in infrastructure but more needs to be done in terms of capital and investment regulations to achieve a sustainable growth.
( Dezan Shira & Associates ).The Ministry of Transport has recently submitted to the Prime Minister the draft to revise the country’s aviation transport development
19
plan till 2020 with a vision to 2030, which is aimed at help Vietnam among the top four leading nations in air traffic in ASEAN . Both the world's largest aircraft manufacturers, Boeing and Airbus, have greatly appreciated the growth potential of the commercial aviation market in Asia, especially in Southeast Asia. The income of the people has increased, the diversification of air transport services has become more and more convenient, leading to the boom in tourism and travel needs of people in this area in recent years. However, rapid development must be accompanied by the ability to control the appropriate growth rate if it does not want to fall into the financial crisis because of too much investment compared to the demand of the airline. The competition is increasingly fierce in terms of ticket prices among rivals on the same route overcome if they want to survive and grow in the current air transport market.
2.4 SWOT Analysis , TOWS Analysis & 4P Analysis
SWOT Analysis
Today, in the classrooms, departments , offices, enterprises from students, staffs to senior leaders, SWOT analysis becomes no stranger. People talk, discuss, analyze and debate with each other about SWOT but did you really understand this
effective analytical method?
The term "SWOT" is an acronym for the words "strengths", "weaknesses", "threats" and "opportunities". Indeed, SWOT analysis as an effective tool for strategic planning purposes because it provides a good all-around view of the company's current and forward-looking situation. SWOT analysis is an integral part of strategic planning process . In a book : “Strategic Management and Competitive Advantage ” is written by Barney & Hesterly (2006), two authors presented strategic planning model following the picture below:
20
Fingure 2.6.: Strategic planning model
Over the past decade, SWOT analysis has been extended beyond companies to countries and industries and is used in virtually every business case . Furthermore, use of SWOT is as teaching tools by consultants, trainers and educators.
That’s right, SWOT analysis model supposedly developed by Albert Humphrey in the 1960s and 1970s.This is the result of a research project conducted by Stanford University, USA. This project used data from the 500 largest US’s Companies ( Fortune 500) to find out the reasons for failing in the planning of these
businesses. Albert and his colleagues initially produced an analysis model with a SOFT name: Satisfactory (Satisfactory) - Good thing in the present, Opportunity (Opportunity) - Good future, Fault (Fault) - Bad thing in the present; Threat (Threat) - Bad things in the future. However, until 1964, after this model was introduced to Urick and Orr in Switzerland, they changed F (Fault) to W (Weakness) and SWOT was born there.
The first version was tested and introduced to the public in 1966 based on research at Erie Technological Corporation. In 1973, SWOT was used at JW French Ltd and really developed from here. In early 2004, SWOT was perfected and showed its effective ability to deliver and unify the objectives of the organization without depending on advice or other costly resources (Saga ).
21
SWOT analysis (or SWOT matrix) is a useful strategic planning tool used to help a person or organization identify strengths, weaknesses, opportunities, and threats related to business competition or project planning. SWOT analysis can help them gain insights into the past and think of possible solutions to existing or potential problems, either for an existing business or for a new venture (USDA, 2008; Nouri et al., 2008). According to David (Fred R. David, 2008: 8), all organizations have strengths and weaknesses in the functional areas of business. No company is as strong or weak in all business areas. Internal strengths and weaknesses combined with external opportunities and threats and a clear mission statement, became the basis for determining the strategy and goal. Objectives and strategies set by leveraging internal strength and overcome weaknesses.
Specifically, SWOT is a basic model that assesses what a business can and cannot do, as well as its potential opportunities and threats. Users of SWOT analysis often ask and answer questions to generate meaningful information for each category to make the useful tool & identify their competitive advantage. Once this is
completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve the desired results (Singh, 2010). SWOT has been described as the tried-and-true tool of strategic analysis (Dess & Gregory, 2018).
SWOT is made of two parts: The strengths (S) and weaknesses (W) sections
provide a look at the company's current position. The opportunities (O) and threats (T) sections help the company project possibilities and challenges going forward.
Internal factors : The strengths and weaknesses internal to the organization External factors: the opportunities and threats presented by the environment
22
Fingure 2.7: Components of Swot Analysis
Strengths refer to core competencies that give the firm an advantage in meeting the
needs of its target markets. Strengths describe what an organization excels at and what separates it from the competition: a strong brand, loyal customer base, a strong balance sheet, unique technology, and so on.
Weaknesses are factors stop an organization from performing at its optimum level.
They are areas where the business needs to improve to remain competitive: a weak brand, high levels of debt, an inadequate supply chain, or lack of capital.
Weaknesses are factors stop an organization from performing at its optimum level. They are areas where the business needs to improve to remain competitive: a weak brand, high levels of debt, an inadequate supply chain, or lack of capital.
Opportunities are favorable conditions in an organization’s environment that can
produce rewards if leveraged properly. Opportunities must be acted on if the organization wants to benefit from them.
Threats are barriers presented to an organization that prevent them from reaching
their desired objectives.
SWOT Analysis
Internal Factors
Strengths
& Weakness
External Factors
Opportunities
& Threats
23
Factors that affect the four basic components included in the SWOT Analysis:
Fingure 2.8: Swot Analysis templates (source by Edrawsolf.com) Internal Factors (S & W) may include all of the 4Ps as well as personnel,
manufacturing capabilities, resources owned, finance, excess or lack of internal organization, the experiences of the previous organization.
External Factors (O & T) may include trends, cultural, social, politics, ideology,
capital resources, government regulations , economy ,current events, environment, technological development.
The internal analysis is a critical stage in identifying the resources, capabilities,
core competencies and competitive advantages, using a functional approach to review finance, management, infrastructure, procurement, production, distribution, marketing, reputational factors and innovation.
The external analysis identifies market opportunities and threats by looking at the
24
The result of SWOT analysis is presented in the form of a matrix consisting of 2 rows of 2 columns and divided into 4 parts. Each part corresponds to strengths, Weaknesses, Opportunities, and Threats. SWOT is structured as follows:
HELPFUL
To Achieving the Objective
HARMFUL
To Achieving the Objective
INTERNAL FACTORS (attributes of the organization ) STRENGTHS:
Strengths are positive internal factors with the company’s control
WEAKNESSES Weaknesses are internal factors that take away from the organization or leaves it at a disadvantage. EXTERNAL FACTORS (attributes of the environment) OPPORTUNITIES: Opportunities are external factors presented by the environment that the
organization could exploit to its advantage.
THREATS:
Threats are external factors that could cause trouble to the organization
Table 2.9: Swot Matrix
TOWS Analysis
Next, the TOWS matrix is derived from the SWOT analysis model, analyzing the strengths and weaknesses within the enterprise as well as the external opportunities and challenges that businesses face. TOWS is a variant of the SWOT model and
25
developed in a book " The TOWS Matrix: A Tool for Situational Analysis" by American international business professor: "Heinz Weirich 1982"
The TOWS matrix is designed to develop strategic choices by analyzing both
internal and external factors . TOWS is a very practical tool, particularly in the field of business administration and marketing. Whereas SWOT Analysis starts with an internal analysis, the TOWS Matrix starts the other way around, with an external environment analysis; the threats and opportunities are examined first. From that standpoint, an organization gets a clear picture of its environment and the opportunity to think about strategy and what direction the company will go in. Next the company’s strengths and weaknesses are considered; what it’s good at internally and what it’s not so good at. The external analysis is linked to the analysis and the resulting TOWS Matrix can help an organization to make
decisions better, seize opportunities and protect itself better against threats (Tools Hero, Tows Matrix).
The TOWS Matrix helps businesses to identify their strategic options. An
organization gets the opportunity to make the most of its strengths and get around its internal weaknesses and learn to deal with them properly. Externally, an
organization learns to carefully look for market opportunities and recognize possibilities. And they learn how to control and overcome potential threats.
The TOWS Matrix can also help with brainstorming and developing great ideas to generate effective marketing strategies and tactics. Furthermore, the model goes beyond merely finding out the strengths and weaknesses within an organization and what opportunities and threats there are in its environment. It forces
organizations to really think about how they can improve themselves, how they can guard against threats and become more aware of their expertise and potential
26
EXTERNAL FACTORS INTERNAL FACTORS
S-STRENGTHS W-WEAKESSES
O-OPPORTUNITIES SO - STRATEGIES
Use internal strengths to take advantage of opportunities WO – STRATEGIES Improve weaknesses by taking advantage of opportunities T-THREATS ST – STRATEGIES Use strengths to minimize threats WT – STRATEGIES Work to eliminate weaknesses to avoid threats.
Table 2.10: Tows Matrix
SWOT analysis combined with a TOWS analysis play a important stage in the strategic planning . They offer a good starting to asses the current situation and to evaluate potential next steps.
Marketing Mix Analysis
Marketing is crucial job to the success of a business, with its main focus on customer satisfaction, quality, and consumer value. Marketing Mix is one of the most commonly used strategies. The Marketing Mix (also known as the 4 Ps) is a foundation model. The Marketing Mix has been defined as the "set of marketing tools that the firm uses to pursue its marketing objectives in the target market" ( Kotler). Marketing Mix describes the set of tools that management can use to influence sales. To begin with, an organization may decide on its target group of customers to be served. Once the target group is decided, the product is to be
27
placed in the market by providing the appropriate product, price, distribution and promotional efforts. These are to be combined or mixed in an appropriate
proportion so as to achieve the marketing goal. Such mix of product, price, distribution and promotional efforts is known as ‘Marketing Mix’.
According to Philip Kotler “Marketing Mix " is the set of controllable variables that the firm can use to influence the buyer’s response”. The controllable variables in this context refer to the 4 P’s [product, price, place (distribution) and
promotion]. Each firm strives to build up such a composition of 4P’s, which can create highest level of consumer satisfaction and at the same time meet its
organizational objectives. Thus, this mix is assembled keeping in mind the needs of target customers, and it varies from one organization to another depending upon its available resources and marketing objective.
The origins of the 4 Ps can be traced to the late 1940s. The first known mention of a mix has been attributed to a Professor of Marketing at Harvard University, Prof. James Culliton. In 1948, Culliton published an article entitled, The Management of Marketing Costs in which Culliton describes marketers as 'mixers of ingredients'. Some years later, Culliton's colleague, Professor Neil Borden, published a
retrospective article detailing the early history of the marketing mix in which he claims that he was inspired by Culliton's idea of 'mixers', and credits himself with popularizing the concept of the 'marketing mix'. According to Borden's account, he used the term, 'marketing mix' consistently from the late 1940s. For instance, he is known to have used the term 'marketing mix' in his presidential address given to the American Marketing Association in 1953. Although the idea of marketers as 'mixers of ingredients' caught on, marketers could not reach any real consensus about what elements should be included in the mix until the 1960s. The 4 Ps in its modern form, was first proposed in 1960 by E. Jerome McCarthy; who presented
28
them within a managerial approach that covered analysis, consumer behavior, market research, market segmentation, and planning. Phillip Kotler, popularised this approach and helped spread the 4 Ps model. McCarthy's 4 Ps have been widely adopted by both marketing academics and practitioners.
Marketing Mix is an useful tools used by businesses to achieve marketing goals in the market. McCarthy's marketing mix has since become one of the most enduring and widely accepted frameworks in marketing. Marketing Mix or 4Ps is
categorized according to 4P model, including: Product (product), Price (price), Place (distribution), Promotion (promotion) are used in goods marketing activities (McCarthy, J. 1960). Below will be 4P model in traditional marketing mix
Product (Product) : Product is one of the first marketing mix components in 4p
series. It could be a tangible product or some intangile service. Examples of tangible products can be motor vehicles, a smartphone, or a production machine, etc. Examples of intangile products (services) are services like industry,
restaurants, hotels, spas, travel services or bank credit services, ...
Price ( Price): The product price is the cost that the customer has to pay to own /
use the product or service ( including market share, competition, material costs, product identification and emotional value of the customer to product). Valuation in today's fiercely competitive environment becomes extremely important and challenging. If product prices are set too low, businesses will have to focus on selling in larger quantities to earn profits. If the price is too high, customers will gradually turn to competitors products. Key factors in price strategy include initial price point, list price, discount rate, payment period, ...
Place (Distribution): Distribution channels are representative of where a product
29
stores on the internet. Owning a distribution system is an important factor to bring products to customers. If businesses do not invest, develop proper distribution channels can waste effort to advertise, produce products without making the market successful.
Promotion (Trade promotion): Sales support activities to ensure that customers are
aware of the company's products and services are considered trade promotion. From a good impression of a product or service, customers will easily conduct real trading transactions, increase conversion rates with potential customers. Activities in this stage include advertising, catalogs, public relations and retail, namely advertising on television, advertising in newspapers, advertising on radio... With larger budgets, businesses. Industry can sponsor TV programs or radio stations that are watched by the public, organize programs for close customers to increase brand awareness with great customers them.
30
Digital Marketing Mix
Digital marketing mix is fundamentally the same as Marketing Mix, which is an adaptation of Product, Price, Place and Promotion into digital marketing aspect (Dominici, G (2009). Digital marketing can be commonly explained as 'Achieving marketing objectives through applying digital technologies'.(Chaffey, Dave; Ellis-Chadwick, Fiona (2012)).
Product: Thanks to the interaction and connection of the Internet, Product has been
redefined as 'virtual product' in the digital marketing aspect, which is regarded as the combination of tangibility and intangibility. Through the form of digital, a product can be directly sent from manufacturers to customers
Price: Price concerns about the pricing policies or pricing models from a company.
Due to the widely use of the Internet, many applications could be found in both consumer's and producer's perspective. From consumers' side, the Internet enables people to make a comparison to a real-time prices before they make a consumption decision, which is time-saving and effort-saving for the consumers. As for the suppliers, they can adjust prices in the real-time and provide higher degree of price transparency with customers. Besides, the Internet is more likely to ease the
pressure on price because online-producers do not have to put budget on renting a physical store. Hence, making new or adjusting pricing strategies is essential for the company that wants to enter the Internet market.
Place: With the application of the Internet, place is playing an increasingly
important role in promoting consumption since the Internet and the physical channels become virtual. The major contribution from the Internet to the business is not only making it possible to selling products online, but also enabling
31
convenience of navigating from one site to another, place from the digital marketing perspective is always linked with promotion, which means retailers often uses third-party websites such as Google search engine to guide customers to visit their websites.
Promotion: Promotion refers to select the target markets, locate and integrate
various communications tools in the marketing mix. Unlike the traditional marketing communication tools, tools in digital marketing aim at engaging audiences by putting advertisements and contents on the social media, including display ads, pay-per-click (PPC), search engine optimization (SEO) etc. In order to help in making online marketing campaign, Chaffey and Smith suggested that they can be separated into six groups.
Searching marketing, including search engine optimization (SEO), pay-per-click (PPC).
Online PR, enlarging good comments on one's products or services while reducing negative comments.
Adverse comments.
Online partnerships, building relationships between third-party webs to promote products or services.
Interactive advertising, Opt-in e-mail advertising.
Social media marketing, starting and participating in customer to customer, customer to company interaction through social media.
32
Chapter Three: Research Method
3.1 Qualitative Analysis
The research method of this thesis is qualitative analysis. After we have an
overview of the low-cost aviation industry in the world, Southeast Asia, especially Vietnam based on the theoretical contents presented in chapter one and chapter two of the study. Next is to use SWOT & 4P analysis mentioned in chapter 2 to analyze Vietjet's business situation, the results that Vietjet has achieved, analyze internal & external factors directly or indirectly cause affect business performance, reputation, growth or namely SWOT matrix analysis including strengths, weaknesses,
opportunities, challenges and then propose effective strategies for businesses. Followed by 4P analysis, we will study how Vietjet implements Marketing
strategies for products, prices, locations and promotions for domestic and foreign markets. All data will be collected from Vietjet's official website, Statistical portal, Wikipedia, Financial reports, Business reports from reputable websites, world aviation data center, evaluation of aviation experts, CEO speeches, books,
newspapers, magazines ... Finally, based on the results of qualitative analysis, we will draw conclusions about marketing strategies for the industry. Low-cost aviation and some useful recommendations bring good results for Vietjet's
development in the future. Besides, this thesis will point out the limitations in the research process and future proposals
33
Fingure 3.1 Research Framework
3.2 Research Framework
This study focuses on Marketing strategy for low cost airline industry based on a case of Vietjet Air in Vietnam. The overall research model is illustrated in fingure 3.1. After 6 years of participation in the airline market, Vietjet has achieved an amazing results because of the right choice of business model , seize opportunities at the right time, have a careful preparation, financial potential , strong relationship and business environment in Vietnam suitable for development of LCC: Vietnam is an attractive market thanks to its high growth rate in Asia Pacific region. The proportion of people flying is still low compared to the region. High tourism growth in the region and the most important thing is Vietjet's bold marketing strategy that has brought a great result for this low-cost airline.
Marketing Strategy for Vietjet Air
Qualitative Analysis: SWOT & 4P analysis
Recommendations for the case of Vietjet’s
growth from LCC industry
34
Chapter Four: Major Findings
4.1 Brief Introduction of Vietjet
VietJet Aviation Joint Stock Company ( trading name as VietJet Air or Vietjet) is
an international low-cost airline from Vietnam. It was the first privately low-cost airline in Vietnam being granted its initial approval to operate by the Vietnamese Minister of Finance in November 2007. Due to fluctuations that caused gasoline and oil prices to rise therefore it was not until December 2011,Vietjet officially launch into airline market by the first flight from Tan Son Nhat Airport to Noi Bai Airport and made a big splash early on with ads featuring bikini-clad flight
attendants .
VietJet was established from 3 main shareholders of T&C Group, Sovico
Holdings and Ho Chi Minh City Housing Development Commercial Joint Stock Bank (HD Bank), with an initial charter capital of VND 600 billion (equivalent to 37.5 million USD at the time of capital contribution) . Vietjet is an airline to operate under the new-age carrier model , cost-effective & flexible and offers a wide range of services for customers to choose from. Not only air transport, Vietjet also provides services through advanced e-commerce technology
applications. Vietjet is an official IATA member with IOSA'scertificate in 2016 (IATA Operational Safety Audit). Culture of safety is a significant integral part of Vietjet corporate culture. This will be grasped thoroughly by every staff at Vietjet. Currently, Vietjet is exploiting 66 aircrafts A320 and A321 , carrying out more than 385 flights a day and transporting more than 65 million passengers with 105 routes covering all destinations in Vietnam and international routes to Japan, Hong Kong, Singapore, Korea, Taiwan, China, Thailand, Myanmar, Malaysia, Cambodia... The company plans to develop a wide-spread network in the
Asia-35
Pacific region continue to expand routes in the region and has signed modern, modern generation aircraft purchase contracts with reputable aircraft
manufacturers in the world.(Vietjet’s annual report 2018)
Fingure 4.1: Vietjet’s flight network 2018
At present, Vietjet is the largest domestic airline with 45% market share in Vietnam , the fastest growing aviation market in Asia Pacific. Vietjet also had a spectacular development along with Vietnam stock market: Vietjet stock (VJC stock code) was officially listed on Ho Chi Minh City Stock Exchange (HSX) in February 2017 and soon included in the VN30 list from January 22, 2018.
36
Fingure 4.2 :Vietnam domestic market share %
For 5 years of taking off and serving customers, Vietjet has been honored with 32 domestic awards and 9 significant international awards such as :
Vietjet have been ranked 22nd in the top 50 global best airlines in financial activities and health in 2018 voted by Air Finance Magazine - one of the world's leading aviation financial magazines .
Vietjet also has been awarded the world's highest ranking for safety with 7-stars from the world's only safety and product rating agency AirlineRating ;
Being awarded the Third-Grade Labor Order of State President for outstanding achievements in charity and humanitarian work and contributions to the
country's development.
Vietjet won the Top Airlines by Absolute Passenger Growth in Southeast Asia at Changi Airline Awards 2018;
Top 10 Sustainable Development Businesses as recognized by Vietnam
Economic Times’ Editorial Board and readers; Top 100 Best Places to Work in Vietnam voted by Anphabe and Nielsen ;
37
Being honored as one of the Vietnam's 50 best listed companies in 2018 by Forbes.
Being awarded "Best Ultra Low Cost Airline 2018 " for two consecutive years. Honored as “Pioneering Airline” at The Guide Awards 2018.
Being honored with Asia's Best Flight Attendant Wardrobe at NOW Travel Asia Magazine awards ceremony in Chengdu City (China).
Honored as “The best customers’s choice airline award” at award ceremony of Cool Product Awards 2018…
Furthermore, Vietjet Air under the leadership of Ms Nguyen Thi Phuong Thao: Vietnam's first self-made woman billionaire & the richest female billionaire in Southeast Asia ($ 2.2 B) , has become Southeast Asia's second largest airline, surpassing AirAsia , only behind Singapore airlines (US 3.6B) in the market capitalization . Vietjet Air's market capitalization is currently at VND 64,492 billion (USD 3B). Madam Thao also said that: "I have always aimed big and done big deals. I have never done anything on a small scale. When people were trading one container [of goods], I was already trading hundreds of containers". (Forbes). General Director & CEO of Vietjet Air: Nguyen Thi Phuong Thao was also
honored in the Top 100 most powerful women in 3 consecutive years (Forbes); honored by Bloomberg as one of 50 global leaders in 2018 and honored as the most successful businesswoman in both Vietnam and the ASEAN region at the award ceremony of the ASEAN Business Award 2018.
Vision: To become a multi-national aviation group with a route network covering
the entire region and the world, providing and developing not only aviation services but also consumption products on the e-commerce platform and being a favourite and trusted brand name (Website of VJ)
38
Mission: To operate and develop domestic, regional and international route
network. To bring a breakthrough in aviation services. To make aviation services to become popular means of transport in Vietnam and in the world. To bring joyfulness, customer satisfaction by providing luxurious and exceeding expectation services with friendly smiles.
Core value: Safety - Happiness – Affordable Price - Punctuality
Corporate Culture: Awareness of safety – Integrity – Differentiation, full of
inspiration – Diligence, Resourcefulness – Joyfulness, Strength and Excitement
Business sector: Vietjet's business activities focus on 5 main groups, including:
Education and Training : For aircraft drivers, Technicians & Other Building: Real estate, Exploiting, Leasing…
Direct support activities/others: Ground services , Maintenances , technical supports, Fuels , Accessaries
Business: Food Service, Machinery / aircraft: Sell, Broker, Auction; Ticket distributor, Advertisement, Retail, Restaurant
Passenger transport airline: Promote / organize tourism, Road passenger transport/ others, Transportation of goods
Vietjet’s Business Model: Based on low-cost airline model with specific elements
such as single-point flight, focusing on short-haul flights with high flight frequencies, focusing on cost control, the main web-based distribution channel Consantly innovation to create make a difference in the quality of products & services offer to customers, Vietjet has succeeded in building a new generation airline model: low cost but with superior service quality that meets industry 4.0 and serves the diverse needs of different customers.
39
Trading name VietJet Air (VJ or VJC)
Founded November 2007; 11 years ago
Commenced operations 25 December 2011
Hubs Cat Bi International Airport
Da Nang International Airport Noi Bai International Airport
Tan Son Nhat International Airport
Fleet size 66 (orders :314)
Destinations 105
Company slogan Vietnamese: "Bay là thích ngay!"
English : "Enjoy Flying!
Parent company Sovico Holdings, HDbank
Headquarters Ba Đình, Hanoi, Vietnam
President and CEO of Vietjet
Nguyen Thi Phuong Thao
Employees 2000
Website www.vietjetair.com
Table 4.3: Vietjet Air
Although facing many difficulties but as a driving force for the aviation industry, Vietjet has achieved many impressive results in 2018. Last year, Vietjet recorded a consolidated revenue of VND 53,577 billion, consolidated pre-tax profit VND 5,816 billion; proudly transports 23.06 million passengers, operates 66 aircraft with 105 domestic and international routes, carries out a total of 118,923 safe flights. This is the results of the effort and passion of whole Vietjet staffs. After 8 years, Vietjet has really made a revolution in the airline industry with a lot of changes.
40
That change not only brings sustainable value to investors and partners but also practical benefits for people and communities; positive impact on managers; create a new environment with new elements, new market problems that other airlines are adapting to. Vietjet's success story is concerned by the aviation industry and shared in regional forums and made a strong impression on international friends…
Fingure 4.4 : Vietjet's business results
4.3 SWOT & 4P Analysis
SWOT Analysis
Proud to be a new generation airline with modern fleet, Vietjet has contributed significantly to serve the travel needs of tens of millions of passengers and become a favorite airline in the domestic and regional. VietJet emerged as one of the
41
leading low cost airline in Vietnam and has quickly built up a significant position in one of the fastest growing aviation in Southeast Asia region . VietJet was launched operation in Vietnam at the end of 2011 and has also been consistently profitable since 2013. Vietjet has already become Vietnam's largest domestic airline with 45% market share in 2018 . However, a large proportion of VietJet's profits have been generated from sale leasebacks (SLB). VietJet has also enjoyed low maintenance costs as a result of operating a new fleet. VietJet could face higher aircraft rental & maintenance costs in future, the entry of new firms
(AirAsia, Bamboo Airways... ) and will also have to overcome stiff competition as it starts to focus more on expanding in the international market.
Here, I will proceed to do a SWOT analysis based on Vietjet’s strengths, weaknesses, opportunities and threats.
STRENGTHS
VietJet has quickly captured significant domestic market share over the years Vietjet Air exploited its first commercial flight at the end of 2011. In 2012, Vietjet's market share was only 8% and Vietnam Airlines was 70%. However, after 6 years since the first commercial flight, Vietjet Air has risen to become the largest domestic market share in Vietnam (45% in 2018), surpassing Vietnam Airlines and Jetstar Pacific. In 2018, the new generation airline Vietjet continues a year of high and sustainable growth. Not only exceeding Vietnam Airlines in terms of market share, Vietjet Air also rose to financial ratios. Vietjet's total
number of passengers reached more than 23 million, leading the domestic market, the number of international flights increased to 66, accounting for nearly two-thirds of the airline's total routes. The results of business activities in 2018 audited with revenue of VND 53,577 billion and profit before tax of VND 5,816
