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Home > Business/Finance > Diversified Services > Shipping & Logistics
Vietnam Freight Transport Report Q4 2008
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Jetstar Pacific, Vietnam’s second largest airline which is now 18% owned by Qantas of Australia, said inAugust that it would drop its flights to the central Vietnam beach resort city of Nha Trang due to high fuelcosts, and would instead open routes between Ho Chi Minh City and Bangkok in Thailand, Siem Reap inCambodia, and Singapore. The airline had designed an operations plan in 2007, using a reference fuelprice based on a US$70 barrel of oil, a level which has been exceeded throughout 2008 (at the time of theannouncement in August the crude oil price had dipped from earlier peaks in 2008 to US$114/bbl, stillover 60% higher than the reference price). Deputy CEO Nguyen Thi Thuy Binh noted that fuel nowaccounted for 60% of operating costs adding that ‘building a new business plan will focus on the routeson which travel demand is high, so that would help the airline fuel the financial impact from fuel prices.’Jetstar said it would gradually shift the composition of its fleet from the current Being 737-400 aircraft tomore fuel-efficient Airbus A320s. It aims to have a total of 30 A320s by 2014, the first of which was dueto be delivered before the end of Q308. Taking this and other developments into consideration, along withour projections for the growth of demand, BMI’s newly released Vietnam Freight Transport reportconcludes that airfreight traffic will increase by an annual average of 10.1% in 2008-20112, measured intonnes per km.
A number of factors underpin our optimism. One is the realistic prospect of a long, export-led boom inVietnam, with annual GDP growth likely to average 7.5% in 2008-2012, only fractionally slower than the8.0% rate achieved in the preceding five-year period. Vietnam Airlines is poised for strong growth.Infrastructure plans are also ambitious. The government has announced plans to build the country’slargest airport at Long Thanh in the southern province of Dong Nai, at an estimated cost of nearlyUS$8bn. Noi Bai International in Hanoi will also be modernised, with a new runway and the enlargementof the cargo terminal.
Our overall outlook for the nascent freight transport industry across the different modes is bullish. In roadhaulage, we have trimmed our forecast to take account the effects of high oil prices and continuinginfrastructure bottlenecks. But we still see road-freight turnover running ahead of the general rate ofeconomic expansion in Vietnam. We see it growing by an annual average of 9.4% over the next fiveyears, followed closely by maritime freight (9.1%), pipeline throughput (8.7%) and rail (8.3%). FullWorld Trade Organisation (WTO) membership, achieved in early 2007, can be seen as supportive ofgreater freight transport turnover relative to GDP across all modes, particularly so for shipping. We nowexpect total freight carried growth across all modes, measured in million tonne-km (mntkm), to average8.9% per annum in 2008-2012.
Under BMI’s freight transport rating system, Vietnam achieves a composite score of 60.3 out of apotential maximum of 100. Vietnam’s stronger points are freight growth, transport infrastructure growthand the transport intensity index, which measures the dynamism of the country’s foreign trade. BMIviews Vietnam as being weaker in the other four categories: economic and political long-term risks andthe country’s regulatory and competitive environment (corruption is a particular problem).According to our latest estimates, the total value of transport and communications GDP will rise toUS7.3bn in nominal terms by 2012, representing 4.3% of Vietnam’s GDP.
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