Why Vietnam’s Aviation Boom Might Actually Be Bad News for Most of Its Airlines
Vietnam’s skies are getting crowded. With 83.5 million passengers passing through its airports in 2025 and a trajectory pointing toward 95 million by year’s end of 2026, the Southeast Asian nation has cemented its position as one of the region’s fastest-growing aviation markets. International arrivals exceeded 20 million for the first time ever. Cargo volumes surged 18.5% year-on-year. By virtually every metric, Vietnamese aviation is soaring.
But here’s what the celebratory headlines miss: fleet expansion among Vietnamese carriers is about to outpace passenger growth, setting the stage for a brutal shakeout that could reshape the competitive landscape entirely.
The numbers tell a story of ambition colliding with market reality. Vietjet received 22 aircraft in a single month—December 2025 alone—marking the largest fleet expansion in the carrier’s history. That’s the equivalent of an entire standalone airline added to the fleet in roughly thirty days. Sun PhuQuoc Airways, the first new entrant in five years, launched with dreams of building 30-35 aircraft by 2027. And Bamboo Airways, recently rescued from near-collapse, is planning to add eight to ten aircraft annually until 2030.
All this while 28 aircraft—roughly 13% of Vietnam’s commercial fleet—sit grounded due to a global engine crisis that shows no signs of abating until at least 2027.
Something has to give. And the analysts are starting to say it out loud.
The Two-Headed Duopoly Isn’t Going Anywhere
Perhaps the most counter-intuitive aspect of Vietnam’s coming aviation battle is that it won’t really involve the two airlines that matter most.
Vietnam Airlines and Vietjet together control approximately 90% of the market. That dominance isn’t accidental—it’s structural. Both carriers have pivoted aggressively toward international expansion, where yields are higher and regulatory constraints on domestic pricing become irrelevant. Domestic routes in Vietnam are subject to price ceilings, meaning carriers can compete on frequency and service but not on pushing fares higher during peak demand. International routes face no such constraints.
Vietnam Airlines recorded its best financial performance ever in 2025, posting consolidated revenue exceeding 123 trillion VND ($4.8 billion) and pre-tax profit over 8.45 trillion VND ($330 million). The flag carrier launched or resumed 14 international routes in 2025, its largest network expansion ever. The airline now connects Vietnamese cities to Copenhagen, Milan, Moscow, and destinations across Northeast Asia and the Middle East. Its seven European destinations for the 2025-26 winter season would have seemed ambitious even five years ago.
The Copenhagen route deserves particular attention. Vietnam Airlines became the only carrier offering nonstop service between Vietnam and Northern Europe—a 12-hour flight that positions the airline as a genuine long-haul player rather than merely a regional operator.
Meanwhile, Vietjet’s $32 billion fleet expansion isn’t really about Vietnam at all. The budget carrier ordered 20 A330neo widebodies from Airbus in May 2025, finalized 100 A321neo orders in October, and is funneling Boeing 737-8 aircraft to its Thai subsidiary. The company operates 115 aircraft with over 400 more on order—fleet numbers that suggest regional, not merely national, ambitions. At the Paris Air Show in June 2025, Vietjet signed a memorandum of understanding for 100 additional A321neo jets.
What does this mean for the three smaller carriers—Sun PhuQuoc Airways, Bamboo Airways, and Vietravel Airlines? They’re essentially fighting over scraps while the giants chase bigger prizes elsewhere. The domestic market that these startups must depend on is precisely where competition will be most intense and margins thinnest.
The Real Estate Developer, the Tourism Conglomerate, and the “Resort Airline”
Understanding Vietnam’s aviation competition requires understanding that none of these new entrants are really aviation companies. They’re diversified conglomerates attempting to use airlines as strategic assets within broader business ecosystems. This approach can work brilliantly—or lead to catastrophic capital destruction.
Sun Group, the parent of Sun PhuQuoc Airways, is fundamentally a tourism and real estate developer. The company operates theme parks, cable cars, hotels, and entertainment complexes across Vietnam. When Sun Group’s chairman Dang Minh Truong describes aviation as “the final pair of wings completing our comprehensive tourism ecosystem,” he’s being literal, not metaphorical.
The airline’s explicit positioning as a “resort in the sky”—Vietnam’s first “resort airline”—reveals its true purpose: feeding passengers into Sun Group’s hotels, theme parks, and entertainment complexes on Phu Quoc Island. The carrier received its Air Operator Certificate in September 2025 and began commercial flights on November 1, 2025.
The hub-and-spoke model centered on Phu Quoc makes perfect sense from a resort operator’s perspective. The island was recently named Asia’s most beautiful island and the world’s third-best by Condé Nast Traveler. But the model raises serious questions about broader market viability. How many people actually want to transit through a vacation island? The airline plans to reach 25 aircraft by end of 2026 and 30-35 by 2027, but those projections assume travel patterns that may not materialize.
The timing is strategically interesting: Phu Quoc will host the APEC Summit in 2027, which could bring 10,000-12,000 delegates from 21 member economies. Sun Group is also investing in expanding Phu Quoc International Airport to handle 18 million passengers annually—4.5 times current capacity.
Meanwhile, FLC Group—another property developer—took back control of Bamboo Airways in September 2025 after a disastrous two-year restructuring effort by outside investors. The story of Bamboo’s collapse is almost operatic in its tragedy. When restructuring investors took over in 2022, the airline had nearly 30 aircraft and operated 60 domestic routes plus several ambitious international routes. By the time it returned to FLC, Bamboo was down to seven aircraft and 12 domestic routes.
The airline owes more than 9 trillion VND (approximately $370 million) to suppliers, with the Airports Corporation of Vietnam alone owed about $107 million—80% of which accumulated during the restructuring period. Former chairman Le Thai Sam admitted the decision to return most aircraft during restructuring was a critical misstep: “Only with a larger fleet and broader network can the airline rebuild its cash flow and handle its debt obligations.”
Bamboo received one additional aircraft in December 2025, bringing its fleet to eight. The airline claims it will add eight to ten aircraft annually—a wildly optimistic projection given its financial condition and the competitive pressures ahead.
Then there’s Vietravel Airlines, which has undergone its own identity crisis. T&T Group, a conglomerate with interests spanning ports, airports, and industrial logistics, became a strategic shareholder holding roughly 75% of the carrier. The original tourism company, Vietravel, is divesting completely by end of 2025.
With a charter capital increase to 2.6 trillion VND planned for the first half of 2026 and ambitions to reach 30-50 aircraft by 2030, Vietravel Airlines appears to be betting big. The carrier operated 2,209 flights and served 400,000 passengers in the first half of 2025, achieving an impressive 88% load factor. But reports that AirAsia may be negotiating to invest suggest the carrier might be seeking foreign expertise to navigate what lies ahead.
The Engine Problem Nobody Wants to Talk About
Here’s a detail that tends to get buried in the optimistic press releases: Vietnam’s airlines are operating with one hand tied behind their backs.
As of December 2025, 28 commercial aircraft remain grounded due to Pratt & Whitney’s global engine recall—approximately 13% of the national fleet. The affected aircraft include 24 Airbus A321neos, three A350s, and one A320ceo. Repair timelines stretch from three to ten months, and supply chain constraints mean this problem will persist through at least 2027.
The Pratt & Whitney PW1000G geared turbofan engines—the same engines that power much of the global A321neo fleet—have been subject to an extended recall and repair cycle due to a condition affecting powder metal in high-pressure turbine discs. This condition can lead to premature cracks, risking uncontained disc failures. Nearly 3,000 engines globally are potentially affected.
For context, the current 28 grounded aircraft represents an improvement—there were 33 grounded at this time in 2024. But “fewer grounded aircraft than last year” hardly qualifies as good news. Vietnam Airlines alone parked nearly 20% of its domestic fleet at the crisis’s peak, with some aircraft expected to remain inactive for up to 300 days. The CEO acknowledged that supply chain disruptions had doubled expected maintenance times.
The arithmetic is brutal: more airlines plus more aircraft minus grounded capacity equals lower yields and thinner margins for everyone operating domestic routes. Airlines worldwide face the same challenge, but Vietnam’s smaller carriers—with less financial cushion and fewer route alternatives—are particularly exposed.
Why Long Thanh Changes Everything (And Nothing)
Vietnam’s $18.7 billion Long Thanh International Airport project received its first official flight on December 19, 2025, with commercial operations slated for mid-2026. When fully operational, the facility will handle 80% of international arrivals to the Ho Chi Minh City region while Tan Son Nhat handles shorter regional routes.
For Vietnam Airlines and Vietjet, Long Thanh represents opportunity. Both carriers are positioning themselves as anchor tenants, with Vietjet planning a maintenance, repair, and overhaul facility. The new hub’s capacity—25 million passengers and 1.2 million tons of cargo annually in Phase 1—will ease congestion that has constrained growth at Tan Son Nhat.
For smaller carriers, however, Long Thanh may be a mixed blessing. Operating at a new mega-airport requires scale, infrastructure investment, and operational sophistication that startups typically lack. The hub’s focus on long-haul international routes—exactly where smaller Vietnamese carriers don’t compete—means the domestic market pressure won’t ease.
The International Dimension: More Competition From Outside
As if domestic challenges weren’t enough, Vietnamese carriers face intensifying pressure from foreign airlines.
The Civil Aviation Authority of Vietnam reported that 71 airlines from 30 countries and territories operated 142 regular international routes to Vietnam during the winter 2025 schedule. That’s a significant increase in capacity from carriers who don’t have to worry about Vietnamese domestic price regulations or local infrastructure constraints.
IATA regional vice president Sheldon Hee pointed out that Vietnam has direct flights to only around 30 countries, compared to more than 50 for Thailand and Singapore. That gap represents both opportunity and threat—opportunity for Vietnamese carriers to expand, but also room for foreign airlines to capture traffic that Vietnamese operators aren’t serving.
The warning from Vietnam’s Civil Aviation Authority that domestic carriers must compete “not just on prices but also service quality” suggests regulators see the competitive pressure building.
What Actually Happens Next
Market analysts at securities firm MBS have predicted the obvious: fleet expansion will outpace passenger growth in 2026, intensifying competition particularly among smaller carriers. Their assessment pulls no punches: “The entry of Sun PhuQuoc and the return of Bamboo Airways after restructuring will put pressure on other companies in the sector.”
The most likely scenario involves several concurrent developments. First, a domestic fare war that compresses margins for everyone—smaller carriers most of all. Second, continued international expansion by Vietnam Airlines and Vietjet, who have the scale to weather domestic turbulence. Third, consolidation or partnership deals among the smaller players, possibly including foreign investment (the AirAsia negotiations with Vietravel Airlines being one example).
Sun PhuQuoc Airways might survive on the strength of Sun Group’s integrated tourism ecosystem—but only if enough travelers actually want to route through Phu Quoc. The APEC Summit in 2027 provides a deadline of sorts: demonstrate viability before the world’s attention arrives. Bamboo Airways faces the steepest climb, attempting to rebuild from near-collapse while carrying substantial debt and competing against carriers with deeper pockets. Vietravel Airlines’ fate may depend on whether T&T Group’s airport and logistics investments create genuine synergies or prove to be mere corporate wishful thinking.
The broader picture remains genuinely impressive. Vietnam ranks eighth among Asia-Pacific’s largest aviation markets and sits among the top ten fastest-growing markets in the region. International arrivals surpassed 20 million in 2025, a record. The domestic market shows healthy growth despite aircraft shortages. Boeing’s 2025 Commercial Market Outlook projects Vietnam as Southeast Asia’s fastest-growing aviation market, with annual passenger traffic expected to rise 8.1% between 2025 and 2030.
But impressive macro numbers often mask painful micro realities. When fleet expansion outpaces demand, someone loses. When engine groundings constrain capacity while new entrants add aircraft, the math becomes unforgiving. When property developers and tourism conglomerates enter aviation—a notoriously capital-intensive, low-margin business—assumptions get tested harshly.
Vietnam’s aviation sector isn’t heading toward crisis. It’s heading toward rationalization. The question isn’t whether the market will support six active carriers plus aggressive foreign competition. The question is which ones will still be flying when the shakeout ends.
For passengers, the coming competition likely means more choices and lower fares in the short term. The rivalry between smaller carriers for domestic market share should drive prices down. For the airlines themselves, however, the skies ahead look considerably more turbulent than the celebratory headlines suggest. The winners will be those with the deepest pockets, the most efficient operations, and the clearest strategic vision. The losers—and there will be losers—will be those who mistook ambition for capability.
That’s the reality facing Vietnamese aviation in 2026: unprecedented growth coexisting with unprecedented competitive pressure. The question isn’t whether the industry will thrive. It will. The question is which airlines will be left standing to enjoy that prosperity.
This article was produced in accordance with our editorial standards. Aviantics maintains strict editorial independence.
