Vietnamese airlines granted access to U.S. market for first time

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Vietnamese airlines could struggle to make U.S. flights profitable because of the lack of demand from high-paying business travellers.
Vietnamese airlines could struggle to make U.S. flights profitable because of the lack of demand from high-paying business travellers.

Vietnamese airlines will be able to fly to the United States and codeshare with American carriers after the U.S. Federal Aviation Administration declared the Southeast Asian country complies with international safety standards.

The U.S. aviation safety agency said in a statement late on Thursday that it was awarding Vietnam a “Category 1” rating, two weeks after Reuters reported the decision was expected.

“It’s recognition by a very developed aviation authority which requires a very high standard of safety and security,” Vietnamese Deputy Transportation Minister Nguyen Ngoc Dong told Reuters on Friday.

There are currently no non-stop flights between Vietnam and the United States, despite a large market catering to tourism and visits by friends and relatives. Vietnam Airlines JSC , Bamboo Airways and VietJet Aviation JSC desire to fly to the United States.

Bamboo Airways Chairman Trinh Van Quyet said Bamboo was considering destinations such as Seattle, Los Angeles and San Francisco, with the first route to open in late 2020 or early 2021. His airline has ordered 20 Boeing Co 787s for long-haul flights.

CAPA Centre for Aviation Chief Analyst Brendan Sobie said the FAA rating was important for Vietnam symbolically and politically.

But he said Vietnamese airlines could struggle to make U.S. flights profitable because of the lack of demand from high-paying business travellers.

Vietnam Airlines CEO Duong Tri Thanh told Reuters last year that airline could open routes to the United States despite such commercial limitations, due to a government mandate to help grow the economy.

The airline did not respond immediately to a request for comment on Friday.

Budget carrier VietJet said it plans to purchase wide-body jets capable of non-stop U.S. flights and believes its experience in keeping costs down will give it an effective business model.

“We plan to open routes to cities with Vietnamese communities living in the United States such as in California, serving the large travelling and commercial demand from customers,” the airline said in a statement.

The FAA last year sent a team to Vietnam to conduct a safety assessment.

Vietnam’s rapidly growing aviation market saw traffic increase 16 percent on average each year from 2010 to 2017, government data shows.

Its airlines are major customers of Boeing and Airbus SE .

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