Vietnam’s First Cargo Airline Aborts Take Off Plans Amid Global Economic Uncertainty

IPP Air Cargo confirmed that it had withdrawn its application to become Vietnam’s first freight-only airline amidst “worsening economic conditions, looming global recession, and volatile fuel prices.” It was supposed to launch its first flight from Hai Phong’s Cat Bi Airport this month.

Jonathan Hanh Nguyen, chairman of the airline’s parent company Imex Pan Pacific Group (IPPG), confirmed the company requested the government to end the process of licensing its application to launch IPP Air Cargo. Nguyen noted air cargo demand in the country is expected to decline given the current global economic turmoil.

“Thus, we have decided to end our plan to avoid causing more damage to carriers that are already making losses,” Nguyen told local media, adding that IPPG would resume its plan when the market stabilizes.

It was in June 2021 when IPPG announced its plan to establish an airline specializing in freight transport, with a VND 2.4 trillion ($100 million) investment, at a time when the sector is in chaos due to the pandemic. IPPG was anticipating approximately $71 million in revenue during its first year of operation.

It planned to build five logistics warehouses at Tan Son Nhat, Noi Bai, Cam Ranh, Da Nang, Can Tho, and later Long Thanh airports to bring goods from abroad to gather at these hubs. IPP Air Cargo will use cargo aircraft to deliver the goods to16 other domestic airports.

Before officially scrapping its plans, IPP Air Cargo had already signed shipment deals with several manufacturers. The company already began the rental process of receiving four Boeing 737-800BCF aircraft, one of which was already delivered, while the other three were due to arrive in the next few months. The cargo carrier had also purchased 10 Boeing 777 freighters worth S$3.5 billion.

IPP Air Cargo needed approval from six ministries and an aircraft operator certificate to begin operations. In March, the Civil Aviation Authority of Vietnam reported that the cargo company had met all of the assessment standards and submitted a proposal to the Ministry of Transport to grant it an air transport license.

In September, the Ministry of Planning and Investment asked the company’s four shareholders to confirm their nationalities. Vietnamese and foreign investors have different requirements and obligations when operating a business in the country. IPP Air Cargo confirmed that the company is Vietnamese-founded.

With the company stating its confidence in completing all permits by early November — in time for its first flight — the move to withdraw its application was unprecedented.

Simple Flying, an independent news site for commercial aviation, commented that it was “a mix of poor management and forecasting.”

“Although the air cargo market has been blooming due to the pandemic and is forecasted to expand even more significantly post-pandemic, the current global conflicts and bad economic situations have caused air cargo demand to contract slightly. As crucial markets such as China remain closed off, the forecast is that the demand and supply chains will continue to suffer for the time being,” the report read.

Deteriorating market conditions have severely impacted industries from aviation to manufacturing. With demand for exporting goods dropping, several cargo vessels have been relatively empty. Several airlines, such as Qatar Airways and China Airlines, have reportedly cut cargo capacity to and from Vietnam since September.

Currently, Vietnam has six airlines operating domestic and international flights — all of them are passenger carriers.