Vietnam may see its first dedicated cargo airline by next year as luxury retailer Imex Pan Pacific Group (IPPG) submitted its proposal to the country’s civil aviation authority (CAAV) to establish an airline dedicated to freight transport.

The conglomerate, through its subsidiary IPP Air Cargo JSC, will invest VND2.4 trillion (100 million USD) to develop its logistics capabilites and air network to handle both inbound and out bound shipments in Vietnam.

Luxury retail tycoon and IPPG chairman Johnathan Hanh Nguyen said the move to launch a local cargo airline comes amidst shipping woes for local exporters who are struggling with the higher air freight rates imposed by foreign carriers who hold over 80 percent of the market share.

“Foreign carriers are controlling prices because they are almost alone in the market, with no one competing. If I don’t do it, the demand for air freight will still be congested, price instability will make it difficult for domestic import and export enterprises,” Nguyen said.

At at a time when capacities are congested, the chairman believes the time is ripe for a new airline to come onboard. Nguyen expects IPP Air Cargo to transport some 115,000 tonnes of cargo and generate revenue of US$71 million in its first year.

Also read: Vietjet eyes expansion in cargo business for 2021

IPPG, a major shareholder in Southern Airports Services JSC and Cam Ranh International Airport Terminal JSC, plans to operate five cargo aircraft in the first year, then gradually increase to seven aircraft in the second year and 10 aircraft in the third year.

It also plans to build five logistics warehouses at major international and domestic airports, including Tan Son Nhat, Noi Bai, Cam Ranh, Da Nang, Can Tho and later Long Thanh, to bring goods from overseas to gather at these hubs.

Nguyen says this will allow the company to transport to other domestic airports not covered by foreign airlines, who are only allowed at the Tan Son Nhat and Noi Bai airports.

The chairman is bullish about cargo’s future but he said the road will be ‘difficult and expensive,’ citing the need for modern infrastructure like conveyor belts and modern intelligent management systems at warehouses.

Nguyen revealed that several airlines have approached the company after its initial announcement, who are either selling or leasing aircraft, and he says the plan is to invest in a larger aircraft system for its international business.

IPP Air Cargo hopes to get approval for its air transport business license in the third quarter of 2021 and operator certificate in the fourth quarter, to be able to fly commercially by next year, but not without some headwinds.

In 2020, Vietnam’s prime minister agreed with the Ministry of Transport’s proposal to consider establishing a new airline until after 2022, when the aviation market recovers.

The Civil Aviation Authority of Vietnam (CAAV) will now need the Ministry of Transport’s directive on instructing IPP Air Cargo to prepare the necessary documents to request a business certificate on air cargo transport.

This is not the first time that a dedicated cargo airline was due to operate in the country. Trãi Thiên Air Cargo after its official start in June 2010 faced financial difficulties, which led to the withdrawal of its operating license in December of the following year, with not a single flight flown.