Socialist Republic of Vietnam

United hopes it can build its business by enticing tourists to Vietnam using its own staff and special promotions

By Tan Duc, Sai Gon Times Weekly, 12/4/2004

From December 11, United Airlines will add Vietnam to its network, becoming the first U.S. airline to fly here since 1975.

While other American airlines opt for code-share flights for the Vietnam-U.S. route to minimize risks, United has decided to operate direct flights. Mark Schwab, United Airlines vice-president for Asia-Pacific, says code-sharing is a good solution when the market is not large. It also helps airlines expand their services. The Star Alliance of airlines is an example. Its members can operate services to 700 cities worldwide.

Schwab says the Vietnamese market is large enough for United Airlines to start direct flights with one stopover in Hong Kong. "Before opening direct flights, we have had code-share flights with three airlines to exploit the Vietnam-U.S. route. We have recognized that now is the appropriate time to open direct flights to Vietnam." United Airlines has pioneered the move because it is the U.S. airline that has the most extensive network in Asia-Pacific. "We operate the most flights from the U.S. to this region than any other U.S. airlines. So, it is very favorable for us to open direct flights to Vietnam," he says. However, United Airlines will continue code-sharing and even promote it after opening the direct flights. It will cooperate with other members of the Star Alliance to transport passengers to and from Vietnam. For example, Air New Zealand will fly passengers from New Zealand to Hong Kong and United Airlines will carry them from Hong Kong to HCM City.

Schwab says United Airlines wants to extend flights to Vietnam via Japan because it is where the airline has its strongest presence in Asia-Pacific. However, the Vietnam-U.S. aviation agreement does not allow U.S. airlines to pick up passengers in Japan, but they can do so in Hong Kong. So, the airline has chosen Hong Kong, where it has its second biggest presence in the region, to pick up passengers to Vietnam.

As air travel between Vietnam and the U.S. is increasing fast, United Airlines hopes that it will reach high seat occupancy on the route, about 60%-70% over the first several months of operations. At present, the seat occupancy of its flights in Asia-Pacific averages 81%. "I hope we will soon reach this average rate for the Vietnam route," Schwab says.

However, he is not certain when United Airlines will operate non-stop flights on the route. "If we operate non-stop flights, we have to use two airplanes. The current service needs only one plane. Putting one more plane into service requires a big investment, as the cost of an aircraft ranges between US$200 million and US$250 million. So we have to consider carefully which option is the most cost-effective for passengers."

To boost demand for the route, United Airlines is encouraging American tourists to travel to Vietnam. It is running big promotions for the route in the U.S. and will organize a tour for American journalists so they can introduce Vietnam tourism to American tourists. "We have provided information about Vietnam for our 60,000 employees worldwide to tell to customers. We are running a special promotion for travel to Vietnam among our 44 million frequent fliers," Schwab says. The airline is also trying to make its presence felt in Vietnam.

United Airlines always tries to make travel easier. When it comes to any country, it is interested in what is impeding travel and trying to minimize the obstruction. "When I visit Asian cities like HCM City, Shanghai, Hong Kong or Guangdong, I often come to U.S. consulates there and discuss how we can do to help our customers get visas," Schwab says. He returns to Washington at least once a year to request the U.S. Government to streamline procedures to make travel easier.

For the time being, United Airlines does not plan to open direct flights to Hanoi, as the market is still small. Code-share flights between U.S. cities and Hanoi are more appropriate. The airline also does not think of flights to Central Vietnam. "We have asked the opinions of market consultants, and hotel and resort operators. We know that Vietnam's economy is growing and its infrastructure is being improved. But it's too early to speak of direct flights to Vietnam," Schwab says. With the present conditions of infrastructure in Central Vietnam, it is more appropriate for a regional air carrier to operate small aircraft to the region. "We are ready to cooperate with that carrier to develop this route," he says.

At present, United Airlines is undergoing a strong restructuring to help it cut costs and improve competitiveness.