Overview of Vietnam Airlines Corporation
Vietnam Airlines Corporation, established on May 27, 1995, under Decision No 328/TT by the Prime Minister, operates as a State Corporation under the model of Corporation 91 It functions according to the Charter approved by the Government in Decree No 04/CP on January 27, 1996 The Corporation aims to strengthen the State Enterprise system by effectively utilizing resources to fulfill economic and social missions while enhancing international competitiveness.
Vietnam Airlines Corporation, also known as Vietnam Airlines (VNA), serves as the core enterprise within the Corporation, which comprises 20 member units, including 11 independent and 7 dependent entities, along with 2 enterprises VNA operates as a joint-stock company and is involved in five joint-venture companies, focusing on providing products and services for airline transport As a key member of the Corporation, Vietnam Airlines plays a crucial role in the nation's business development strategies Its primary functions include operating and trading airline transport services for passengers, baggage, and cargo Currently, Vietnam Airlines has expanded its network to cover 28 domestic and 38 international destinations across Asia, Australia, Europe, and America.
Problems should be solved
The demand for cargo transportation, particularly by air, has significantly increased However, Vietnam Airlines has faced limitations in its cargo transport capacity in recent years To enhance its operational efficiency and meet growing market needs, privatization may be a viable solution for the future.
The project’s objectives
This article aims to reassess the cargo transport operations of Vietnam Airlines over recent years, identifying its strengths, weaknesses, opportunities, and threats The analysis seeks to propose strategic solutions for expanding VNA's cargo transport market, aligning with the company's objectives for 2015.
Research’s method of the project
The author employs various methods to gather secondary information on the cargo transport operations of VNA over recent years, while also utilizing expert techniques for in-depth investigation.
The process of establishing the cargo transport of Vietnam Airlines
Vietnam Airlines primarily offers passenger and cargo transport services From 1989 to 1994, the airline focused solely on passenger transport, but by the end of 1994, cargo transport began to grow rapidly, significantly contributing to the airline's revenue Recognizing the importance of expanding cargo services, the Management Board established the Cargo Marketing Board on December 13, 1994, to enhance the management of cargo transport services This board is now known as the Cargo Planning and Marketing Department within the commercial division of Vietnam Airlines Corporation.
Analysis of the internal environment related to activities of the cargo
2.2.1 The internal sources, we will analyze following sources:
Vietnam Airlines (VNA) operates primarily from major airports like NBA, SGN, and DAD, utilizing warehouses and equipment for efficient cargo handling While the majority of these warehouse systems are outdated, the TSC warehouse in SGN stands out as a modern facility VNA's routing network follows a "horizontal axis" model, focusing on NBA, SGN, and DAD to enhance its competitiveness in the Indochina and Asian cargo markets However, VNA faces challenges in expanding its cargo operations to Europe, North America, and Australia due to fierce competition from other airlines and limitations in its exploitation performance.
+ Material sources: The number of aircrafts that VNA actually owns is only 20
The fleet consists of 4 Boeing 777s, 6 Airbus A321s, 8 ATR72s, and 2 Fokker 70s, totaling 45 aircraft, of which 25 are leased, with no cargo aircraft included Maintenance and operational support for these aircraft are primarily provided by two repair enterprises: A76 in NBA and A75 in TSN.
Several enterprises maintain close ties with Boeing, Airbus, and Fokker through sponsorship contracts and aircraft purchase agreements However, the financial potential of VNA is significantly constrained compared to the investment needs of the business The ownership structure results in low capital, high loan dependency, and limited capacity to meet loan interest payments.
2006 up to now, due to influence of objective reasons: disease, war, terrorism and especially the petroleum price is increasing… it directly impacts to the sales of VNA
As of December 2006, VNA employed 10,078 individuals, with specialized airline staff facing stringent professional and language requirements from the recruitment stage To maintain high standards, employees undergo annual training to update their knowledge and refresh their skills, ensuring they obtain necessary certifications and degrees from VNA and IATA to continue their careers.
The management organization utilizes an online model that enables the management board to interact and engage at equivalent levels through digital functions However, this structure leads to slow information processing and updates, resulting in decreased effectiveness and flexibility in addressing extraordinary situations.
2.2.2 Operational analysis of the cargoes transport of Vietnam Airlines
Analysis of the cargoes transport activities of Vietnam Airlines, we concentrate on analyzing, assessing following factors:
The cargo transport sector of Vietnam Airlines (VNA) consistently demonstrates a high output and annual growth rate, as evidenced by data in Tables 8 and 9 of the Appendix VNA maintains a dominant market share in domestic cargo transport, reflecting its strong position in the industry.
VN and BL exploit) ( Table 1 – Appendix ); moreover, the growth rate is continuous from 2003-2006, it proves the satisfactory signals
Vietnam Airlines (VNA) faces challenges in service quality, with customers reporting issues such as poor behavior, delays, and complicated procedures during booking and cargo delivery While its pricing policies for domestic flights lack flexibility due to VNA's dominant market share, the airline employs more adaptable strategies for international flights to attract passengers amid fierce competition from major airlines like Air France, Singapore Airlines, and China Airlines In recent years, VNA has expanded its distribution activities by establishing cargo agents in the domestic market and forming contracts with agents for international operations, alongside implementing customer programs that prioritize space booking, ensure loading capacity, and offer pricing discounts.
Policies of analyzing the human resources and activities of the cargoes transport are specified by following matrix:
1 Advantages of exploiting the domestic cargoes
2 The wide domestic and international network of distributing products under agent models
3 The high growth rate in the cargoes transport during recent years proves VNA affirm its brand name on the market
4 The wide objective market due to the Airlines network always open to other areas in the world
5 The quality of human resources is not high, it should be invested more to train good management staffs, skilled cargoes staffs and technical staffs
1 Financial source of Vietnam Airlines is not strong enough, it depends on the Government, and the capital structure is not balanced
2 Fleet is available but very small; there are no cargo aircrafts compared to competitors
3 Infrastructure serving for the cargoes transport is not synchronous, backward and lack because the enterprise does not concentrate on satisfactory investment
4 The service quality cargoes transport is not fully paid attention to make the customers reduce, it means that the enterprise’s competition is reduced as well
5 There is no satisfactory investment to research the market and marketing’s strategy causes the enterprise is not able to accommodate to changes of the market’s demands
6 The organizational structure is not appropriate, it needs adjusting to be neat to increase the flexibility and effectiveness to the enterprise
An analysis of the internal environment at Vietnam Airlines reveals significant weaknesses in its operations, particularly in the cargo sector The airline is not fully leveraging its strengths and is struggling to address its existing shortcomings in this promising market.
Objectives of the cargo transport of Vietnam Airlines from 2007 to 2015
To develop effective business solutions tailored to the current cargo transport market in Vietnam, Vietnam Airlines must focus on researching and analyzing exploitation output predictions and capital market conditions Aligning these insights with the company's objectives will enable the application of scientific principles to real-world scenarios, facilitating the selection of suitable solutions that align with the overall development strategies of the sector.
3.1.1 Prediction of the market of the cargo transport
Vietnam Airlines leverages natural resources and government support to prioritize cargo transport in and out of Vietnam The airline focuses on international and domestic cargo operations through the Northern Authority Airport (NAA), Middle Authority Airport (MAA), and Southern Authority Airport (SAA), with key international terminals at Tan Son Nhat, Da Nang, and Noi Bai leading the way.
According to data from Table 12 in the Appendix, the forecast for cargo transport by airlines in the Vietnamese market from 2006 to 2020 aligns with the "Development Strategy of the Vietnam Civil Airlines Sector 2005-2010 and its direction to 2020."
The airline cargo market in Vietnam has experienced significant growth, driven by government policies aimed at attracting investment and commitments to open cargo exchange markets through AFTA and WTO agreements However, the current loading capacity of Vietnam Airlines' fleet is insufficient to meet the rising demand for air cargo transport To address this gap, it is essential to upgrade the existing fleet and focus on establishing dedicated cargo aircraft, ensuring optimal utilization of market cargo exchange opportunities.
From 2007 to 2010, the international cargo transport sector experienced a consistent growth rate, averaging 17.1% per year, indicating a significant potential market.
3.1.2 The increase’s objectives, targets of the cargo transport of the Vietnam Airlines Corporation to 2015
During the Party Committee Meeting of Vietnam Airlines Corporation, which focused on the Whole National Delegate Meeting X of the Party in 2005, key development objectives and strategic orientations for Vietnam Airlines were established.
Vietnam Airlines is rapidly modernizing and adopting new technologies to enhance business effectiveness The airline aims to strengthen its position as a leading carrier in service quality and operational efficiency, supporting the country's goals of industrialization and modernization.
However, due to the business sector of the current cargo transport is still weak within the whole business activities of Vietnam Airlines, so it only gives the target:
The simultaneous establishment of airlines and their fleets is essential to achieving cargo transport volumes that align with sales and productivity levels comparable to the average airline in the region.
3.1.2.2 The increase’s targets of the cargo transport of Vietnam Civil Airlines sector
In analyzing the internal and external environments of Vietnam Airlines, along with predictable data and objectives, we have identified key targets for the development of the cargo transport sector by 2015.
Vietnam Airlines aims to maintain its dominant position in the domestic cargo transport market, which currently holds a 91% share In light of the government's airspace opening policies post-2008, the airline is focused on sustaining a market share between 50% and 70% in the domestic sector.
To boost Vietnam Airlines' market share in international cargo transport, the goal is to achieve a target of 40-50% of the total airline cargo transport market for goods entering and leaving Vietnam.
To enhance the fleet's capabilities, we aim to invest significantly in cargo aircraft, ensuring our operational efficiency matches that of leading airlines such as Thai Airways, Eva Air, and China Airlines Our goal is to expand our fleet to include 47 passenger aircraft, thereby increasing our loading capacity and modernizing our services.
24 middle - short ranges (150 seats), 10 middle ranges (250 seats), 4 middle - far range (330 seats) and 9 far ranges (330 seats) and invest more 3 cargo aircrafts
The cargoes output exploited must ensure to the target diagram of the output as follows: ( Table 5 – Appendix )
To enhance airport infrastructure performance for cargo handling and support services, it is essential to optimize warehouse systems for cargo storage, implement specialized equipment, improve the booking network, and develop an efficient internal information system Additionally, establishing a reliable system for locating lost cargo and providing comprehensive passenger services for sending and receiving cargo will significantly contribute to operational efficiency.
Some solutions
3.2.1 Establishment of the solutions by analyzing the matrix SWOT
The SWOT matrix is a crucial cooperative tool for managers, enabling them to identify and develop four key solution groups for their enterprise: Strength-Opportunities (SO) solutions, Strength-Threats (ST) solutions, Weakness-Opportunities (WO) solutions, and Weakness-Threats (WT) solutions.
Coordinating key internal and external factors is one of the most challenging aspects of developing a SWOT matrix It necessitates sound judgment, as achieving the optimal combination is often elusive To formulate effective solutions, we rely on the SWOT matrix as a foundational tool for addressing the business challenges faced by Vietnam Airlines in the cargo transport sector.
3.2.2 According to my subjective assessment and exchanges with experts in the airline sector, we would like to choose some solutions with the high feasibility to expand the cargoes market of Vietnam
1 The rate of economic growth and GDP of Vietnam reaches at high rate
2 Vietnam became the official member of WTO, is receiving the second investment wave, the capacity of cargoes transport by Vietnam market will be increased
3 The stability of politics – society
4 The globalization tendency makes the increase of exploiting reserves of the cargoes among countries
5 The application of technology, science to exploitation processes is the important factor
1 The system of the airline laws are adjusted in the direction of limiting the protection of the State to Vietnam Airlines
2 The global tendency makes the potential competitors increase
3 The severe competition in the market of the cargo transport as facing with competitors
4 The increase of numbers and quality of the transport types to replace the products, services of the cargo transport by airlines
6 At the first stage, it uses methods to attract customers of Vietnam market
1 Advantages in exploiting domestic cargoes
2 The distributive network of the products under the wide domestic and international agent models
3 The high growth rate in cargoes transport, gradually affirm its brand name on the market
4 The objective market is wide thanks to the system of the airlines network that is always expanded to areas in the world
5 The quality of human resources is not high
Solutions to uphold the strengths of the domestic market of the cargo transport and open the international market
Solutions to expand the size of numbers and the fleet’s performance and cargo aircrafts to compete on the market
Solutions to select the objective market
Solutions by using the policies of the service, product’s price to increase the competitive competence
Vietnam Airlines is not strong enough, it largely
Solutions to create depends on the
Government, and the capital structure is not balanced
2 The number of the fleet is small, lack of the cargo aircrafts compared to the competitors
3 The infrastructure for the cargoes transport is not synchronous and the number is lack because the enterprise is not satisfactorily invested
4 The service quality of the cargoes transport is not fully concentrated on, making the decrease of customers; it means that it will reduce the competition
5 It does not satisfactorily invest to the marketing field; it does not suitable to the market’s changes to meet demands of sending cargoes by customers
6 The organizational structure is not suitable service quality of transport, supporting services, material facilities in cargoes transport
To enhance service quality and expand market share in cargo transport, enterprises must invest in and upgrade their marketing systems Securing financial resources is essential to address the challenges of insufficient investment capital, enabling businesses to improve their operational activities and effectively compete in the market.
Solutions to expand the alliance, association with other airlines (the exploited routes, usage of the fleet) and multi- modal freight forwarding agents
3.2.2.1 Solutions to expand the size of numbers and competence of the fleet and cargo aircrafts to compete on the market (S2,3,4,5 + O1,2,,3,4,5,6)
Leveraging a diverse fleet that includes short-range aircraft like the ATR72 and Fokker 70, as well as middle-range options such as the Airbus A320 and A321, and far-middle range models like the Boeing 767 and 777, can significantly benefit the domestic market This strategy not only facilitates passenger transport but also allows for efficient cargo movement to and from local destinations, ultimately reducing the costs associated with purchasing or leasing new planes.
Vietnam Airlines should strategically invest in acquiring or leasing a fleet of medium and long-range aircraft to meet the increasing demand for cargo transport in key international markets, including Northeast Asia, ASEAN, the EU, and North America This investment will enable the airline to effectively combine passenger and cargo services, ensuring optimal capacity utilization It is essential to acquire at least 3-5 medium to long-range cargo aircraft with a loading capacity of 15 tons to support these operations and cater to the growing market needs.
20 tons to meet carried cargo flow that is intended to increase from 2008 to
In 2015, cargo aircraft offered significant advantages by enabling the transportation of large quantities and volumes without being restricted by passenger capacity, unlike traditional passenger airlines This capability is particularly beneficial for Vietnam Airlines, as it enhances their ability to meet increasing demands for loading capacity and aircraft size However, it is crucial to carefully assess investments in purchasing or leasing aircraft, taking seasonal business factors into account To optimize operations, airlines should rationalize loading capacities during low seasons to prevent oversupply while considering leasing additional aircraft during peak seasons.
When investing in expanding their fleet, whether through hiring or purchasing aircraft, Vietnam Airlines should prioritize fuel efficiency and operational range This strategic focus is essential, especially in light of fluctuating petroleum prices and the need to manage initial capital investments effectively.
3.2.2.2 Solutions used price’s policies of the products to increase the competitive competence (S1,2,3,4 + T1,2,3,4)
Vietnam Airlines is applying for following ticket’s price:
Announced price: is the highest price for passengers who singly send cargoes
Agent price: is applied for agents (equivalent to 90-95% the announced price)
Special price: is applied for the low reasons, promotion,… of airlines (over or equivalent to 80% of the announced price)
Vietnam Airlines utilizes a pricing strategy for consignments that reduces fees based on weight, adhering to the principle that heavier shipments incur lower costs This approach incentivizes customers to send larger quantities of goods, making it a cost-effective option for bulk shipping.
Price policies should remain adaptable in response to market fluctuations and competitor strategies, particularly those of airlines like Pacific Airlines, Eva-Air, and China Airlines By closely monitoring these competitors, businesses can adjust their pricing to remain competitive and effectively attract customers in both domestic and international markets.
Large customers, including authorized agents of Vietnam Airlines, freight forwarding agents, logistics companies, multi-modal transport enterprises, and regular passengers sending cargo, can benefit from preferential freight policies By meeting specific output targets, these entities can secure lower prices from carriers, enhancing their market share and attracting more cargo ahead of competitors.
Vietnam Airlines is implementing a pricing strategy that involves reducing fares by 5-10% on high-demand routes (route A) to incentivize passengers to utilize flights with lower demand (route B) This approach aims to optimize cargo capacity on less popular routes while leveraging the competitive pricing of domestic flights to enhance the competitiveness of international routes, which currently hold a weaker market share.
Setting competitive sale prices in small markets can yield significant profits despite lower output, as costs are shared among various airlines operating routes to Australia, including those from Korea, Taiwan, Thailand, Singapore, and Malaysia.
In addition, it should intensify the sale of small consignments, but high value ; for example : precious metals (gold, silver) ; computers’ components; superior fashionable cargoes, cosmetics
To optimize storage efficiency and reduce costs, it is essential to strategically manage the duration of cargo storage in warehouses By implementing a scientific approach to organizing and piling up goods, businesses can enhance their operational effectiveness while minimizing time and expenses associated with storage.
It should stabilize and limit changes and increase costs rate and additional fees for passengers who send and receive cargoes as well
3.2.2.3 Solutions to create the financial source to overcome the deficient situations of the investment capital for the business activities of the enterprise (W1,2,3,4,5 + T1,2,3,4)
From 2006 to 2015, Vietnam Airlines required approximately 25 trillion dong to fulfill its needs for purchasing aircraft, enhancing infrastructure, upgrading equipment and services, and training personnel To address its financial shortfall, Vietnam Airlines should leverage government support to explore solutions for attracting and utilizing unreturned Official Development Assistance (ODA) or low-interest ODA loans, which are annually formalized through agreements with the government.
Conclusion
To address the growing demands of cargo transport for Vietnam Airlines leading up to 2015, this project outlines its objectives and requirements Chapter II analyzes the current state of cargo transport at Vietnam Airlines over recent years, while Chapter III employs analytical tools to evaluate predicted data and identify suitable solutions in line with the airline's business context Based on this analysis, the author proposes key and supplementary strategies to enhance Vietnam Airlines' cargo transport operations.
Due to the project's scope and time constraints, it does not comprehensively address all factors affecting the cargo transport business conditions of Vietnam Airlines Therefore, any proposed solutions for business development should align with Vietnam Airlines' strategic objectives at each stage Additionally, these solutions must be financially viable and highly feasible, taking into account the influence of various objective conditions.
Recommendation to Vietnam Airlines 26 REFERENCES
To enhance its competitiveness in the airline transport sector, VNA should accelerate its participation in global aircraft unions, enabling it to penetrate and expand into larger markets while broadening its operational capabilities.
It should soon exploit the system of booking on line to maximally reduce procedures of importing and exporting cargoes
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The Domestic Market Share Of Cargoes Transport Of
(Source: Marketing Planning Department - Vietnam Airlines 2006)
CI CX JL KE LH OZ SQ TG VN NH MH TH
(Other carriers : AA, AF, AY, BI, CZ, FM, GA )
(Source: Marketing Planning Department - Vietnam Airlines 2006)
(Source : Web site of VNA - Updated on 31 Jan 2007 )
(Nguồn: Ban tổ chức cán bộ LĐTL- Tổng công ty HKVN)
(Source: Marketing Planning Department - Vietnam Airlines 2006)
Northern & Southern Regional Office/ World Branch Of VNA In
(Source: The prediction of the output of the cargo transport 2007-2015 – Vietnam Airlines Corporation -2006)
(Source: Finance And Accounting Department – Vietnam Airlines 2007)
5 Division Advise To Board Of
(Source: Personnel Department – Vietnam Airlines 3/2007)
The cargoes’ transport output, market-share and increase level of Vietnam Airlines from 1996-2006 (at Vietnam market)
International Domestic Total Year Airlines
Total 181.714 100% 71.778 100% 253.492 12% (Source: Cargo Planning & Marketing Department – VNA 3/2007)
(Source: Cargo planning and marketing department – Vietnam Airline
(Source: website of Vietnam Airlines)
(Source: Strategy Of Development Vietnam Airlines 2005-2010 And Orient To 2020)
(Source: website of Vietnam Airlines)