PHAM QUANG MINH SOLUTIONS TO EXPAND THE MARKET FOR CARGOES TRANSPORT OF VIETNAM AIRLINES TO 2015 FINAL PROJECT MASTER IN BUSINESS & MARKETING MANAGEMENT Tutor: PHD,Nguyen Thi Lien Diep Ho Chi Minh 2007 MINISTRY OF EDUCATION AND TRAINING UNIVERSITEU LIBRE DE BRUXELLE HO CHI MINH CITY OPEN UNIVERSITY SOLVEY BUSINESS SCHOOL MBMM PROGRAM Acknowledgement of commitment I, Pham Quang Minh, prepared and conducted this business project “Solutions To Expand The Market For Cargoes Transport Of Vietnam Airlines To 2015”, as final project of our MBMM1 program. With the approval and great advices from Phd. Mrs Nguyen Thi Lien Diep and Mr Ha Duy Quang, Deputy Operational Director Of Tan Son Nhat International Airport Ground Handling Services (TIAGS), this project has been accomplished by myself and served my current company as a real case. I trust the legality of all references, information sources and materials using to complete the project. Acknowledgements The author wishes to express her profound indebtedness to the courtesy advisor of Phd. Mrs Nguyen Thi Lien Diep and for her valuable guidance, document offer and encouragement during the course of this work. Her helpful suggestions, supervision and comments have greatly improved the quality of this work. I also wish to express his faithful gratitude to Dr. Tran Anh Tuan and Professor Jean Pierre Bayens for kindly consenting to be member of my project examination committee. I would like to convey my sincere thanks to Cargo Planning and Marketing Department of Vietnam Airlines for providing the information and general support enabling me to undertake of the Master of Marketing and Management program, and warmest thanks to my mentor, Deputy Operational Director, Mr Ha Duy Quang, who offered me valuable ideas for the final project. I hope to send my thanks to the two enthusiastic coordinators of our course Mr Serge and Ms Bao Tran who have supported us so much in relationship with the professors of SBS and OU as well as all given us convenient materials from Open University for this course. ABBREVIATIONS LIST - AFTA – International Federation of Freight Forwarder Associations - ICAO - International Civil Aviation Organisation - IATA - International Air Transport Association - AAPA- Association of Asian-Pacific Airlines - WB: World Bank - IMF - International Monetary Funds - CAAV - Civil Aviation Administration of Viet Nam - VNA -Vietnam Airlines Corporation - NAA – Northern Authority Airport - SAA – Southern Authority Airport - MAA – Midern Authority Airport TABLE OF CONTENT CHAPTER I 1 INTRODUCTION 1 1.1 Overview of Vietnam Airlines Corporation 1 1.2 Problems should be solved 2 1.3 The project’s objectives 2 1.4 Research’s method of the project 2 1.5 Application’s scope 2 CHAPTER II 3 ACTUAL SITUATION OF THE CARGO TRANSPORT OF VIETNAM AIRLINES DURING RECENT YEARS 3 2.1 The process of establishing the cargo transport of Vietnam Airlines 3 2.2 Analysis of the internal environment related to activities of the cargo transport of Vietnam Airlines 3 2.2.1 The internal sources, we will analyze following sources: 3 2.2.2 Operational analysis of the cargoes transport of Vietnam Airlines 5 2.3 Analysis of the external atmosphere impacts to the cargoes transport of Vietnam Airlines 7 2.3.1 Macro environmental factor: we evaluate by 5 factors impacts to the macro environment 7 2.3.2 Micro environmental factors 7 CHAPTER III 10 SOME SOLUTIONS TO DEVELOP THE CARGOES TRANSPORT OF VIETNAM AIRLINES 10 3.1 Objectives of the cargo transport of Vietnam Airlines from 2007 to 2015 10 3.1.1 Prediction of the market of the cargo transport 10 3.1.2 The increase’s objectives, targets of the cargo transport of the Vietnam Airlines Corporation to 2015 11 3.1.2.1 Objectives 11 3.1.2.2 The increase’s targets of the cargo transport of Vietnam Civil Airlines sector 11 3.2 Some solutions 13 3.2.1 Establishment of the solutions by analyzing the matrix SWOT 13 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 Airlines as follows : 14 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) 17 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) 18 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) 19 3.2.2.4 Solutions to increase the service quality of transport, supporting services, material facilities in the cargoes transport (W5 + O1,2,3,4,5,6) 20 3.2.2.5 Supporting Solutions 23 CHAPTER IV 26 CONCLUSION AND RECOMMENDATION 26 4.1 Conclusion 26 4.2 Recommendation to Vietnam Airlines 26 REFERENCES Executive Summary: The remarkable point of the Vietnam Civil Airline sector was established in 1956 with only 5 aircrafts. It has been operating during 51 years with plentiful events and remarked the important event in 1996 – Vietnam Airline Corporation was established. The business competence of VNA has been developing, enhancing to become an international airline. In addition to trading in passenger transport, goods transport business has been one of strong points of VNA during recent years. After trading in transport business for a long time, VNA got some specific achievements. However, at the moment, as VN step by step integrates into the world economy, opens the domestic market to receive the investment waves from foreign countries, the need of goods transport by airlines is very high. What VNA should do to expand the potential goods market in the future together with facing competitions with other large airlines in the local and international area. With the support of Associate Professor Nguyen Thi Lien Diep and Mr. Ha Duy Quang – Vice Operating Director of TIAGS, on the basics of applying theories of marketing in general and Business Marketing Planning in particular, together with some available documents of VNA, the author decides to choose the project “ Solutions to expand the goods market of VNA up to 2015”; A potential field but has not been exploited enough in recent years by Vietnam Airlines. In hope that this project can give solutions to apply for VNA in the future to bring VNA to the new stages up to 2015. Let’s go the details below: 1 CHAPTER I INTRODUCTION 1.1 Overview of Vietnam Airlines Corporation Vietnam Airlines Corporation is the State Corporation under the model of the Corporation 91 that was established under the Decision No. 328/TT dated May 27th, 1995 of the Prime Minister, operated under the Charter of organizing and operating of the Corporation as approved by the Government under the Decree No. 04/CP dated January 27th, 1996. The establishment of the Corporation is to create a strong economic corporation in the system of the State’s Enterprises, preferentially concentrate on sources to implement economic – social missions well, to increase the effectiveness and the international competitive performance. The Vietnam Airlines Corporation is named Vietnam Airlines (VNA) as the core enterprise. The Corporation has 20 member units (including 11 units of independently entering in the accounts, 7 units of dependently entering in the accounts, 2 enterprises); VNA’s capital is in a joint-stock company and five joint – venture companies. Each unit has specific functions and mainly is to supply products, services for trading airline transport. Is one of the member belonging to the Corporation, Vietnam Airlines is the key unit, gradually strengthen and becomes the key enterprise in the strategies of developing business of our country. Main functions of Vietnam Airlines are to operate, trade airline transport (transport of passengers, baggage, goods and package). Nowadays, Vietnam Airlines has been expanding the airline networks to 28 domestic places and 38 international places at Asia, Australia, Europe and America. 2 1.2 Problems should be solved Now the need of transporting cargoes in general and the need of transporting by airline is very large. However, the capacity of exploiting the cargoes transport of Vietnam Airlines is limited during recent years. It should be privatized in the future. 1.3 The project’s objectives To re-evaluate the operational processes of cargoes transport of Vietnam Airlines during recent years to see the strengths, weaknesses, opportunities and threats to propose solutions to expand the market for cargoes transport of VNA to aim at the objectives to 2015. 1.4 Research’s method of the project The author uses the methods of collecting material, information related to the operations of trading cargoes transport of VNA during recent years to have secondary information. Concurrently the author also investigates, applies the expert methods. 1.5 Application’s scope By evaluating, we will give these solutions to apply to VNA in the future. Especially in the field of cargoes transport, this is the field that there are much potential for VNA to exploit during recent years, however, VNA has not taken these advantages. 3 CHAPTER II ACTUAL SITUATION OF THE CARGO TRANSPORT OF VIETNAM AIRLINES DURING RECENT YEARS 2.1 The process of establishing the cargo transport of Vietnam Airlines Two main business services of Vietnam Airlines are passengers and cargoes’ transport. From 1989 to 1994, Vietnam airline sector only concentrated on trading passengers’ transport. Up to the end of 1994, the output of the cargoes transport has been fast increasing bringing large incomes for the airline transport in Vietnam, meanwhile the growth rate of the airline transport service has been slowly increasing. The Management Board of Vietnam Airlines has predicted the necessity of developing the business services of cargoes transport to the new stage, on December 13, 1994; the General Director issued the Decision to establish the Cargoes Marketing Board, which is the advisory board to the General Director to manage the service business of the cargo transport for Vietnam Airlines. Now it is called as the Cargoes Planning and Marketing Department belonging to the commercial division of the Vietnam Airlines Corporation. (Table 13 – Appendix ) 2.2 Analysis of the internal environment related to activities of the cargo transport of Vietnam Airlines 2.2.1 The internal sources, we will analyze following sources: + Natural sources: with the available warehouses and equipment serving for handling internal and external warehouse cargoes, mainly concentrating on large airports: NBA, SGN, DAD. However, these warehouse systems are downgraded, temporarily constructed (only a warehouse of TSC in SGN is rather modern; Routing network of VNA was constructed by the model of “horizontal axis” mainly [...]... business sector of the cargo transport of Vietnam Airlines up to 2015 as follows: ¬ To try to keep the stability of the market share of the domestic cargo transport of Vietnam Airlines (91% as at the moment), especially as facing with changes of opening the sky of the Government, after 2008 the market share will keep the rate of 50 -70% of the domestic the market share ¬ To increase the rate of the market. .. that is able to replace the airline transport in the future 10 CHAPTER III SOME SOLUTIONS TO DEVELOP THE CARGOES TRANSPORT OF VIETNAM AIRLINES 3.1 Objectives of the cargo transport of Vietnam Airlines from 2007 to 2015 To establish business solutions to be suitable to the objective, actual conditions of the market situation of the cargoes transport, Vietnam Airlines must concentrate on the research,... threats to the market share of the cargoes transport of VNA, especially the domestic market share + Customers: mainly are agents and freight forwarding companies; these companies distribute to 90% of the sales of the cargoes transport, direct customers (single consignment) only occupy to 10% On basics of analyzing the external atmosphere to the operations of the cargo transport of Vietnam Airlines to take... capitals into Vietnam by the Government and the commit to open the market of exchanging cargoes in the AFTA, WTO ,… It shows that the current loading capacity of the fleet of Vietnam Airlines does not meet the increasing demands of the cargo transport by the airlines of the market It needs to upgrade the current fleet and must specially pay attention to establish the cargo aircrafts to ensure the maximum... international markets 3.2.2.5 Supporting Solutions Choose the solutions of the objective market (S1,2,3,4,5 + T1,2,3,4) Ü To the market of the domestic transport cargoes of Vietnam Airlines is strong (occupies to 75% market share), it should continue exploiting the traditional cargoes sources (for example, at the moment, the seafood In addition to looking for other products to expand the market by applying the. .. analysis of the prediction of the exploitation output, the capital market Together with objectives of the enterprise, it helps to apply scientific basics into the actual situation to choose the appropriate solutions with the general development strategies of the Sector 3.1.1 Prediction of the market of the cargo transport With the advantage of the natural sources from establishment and the support from the. .. share of the cargo transport of Vietnam Airlines on international flights to reach at 40-50% of the market share of the cargo transport by airlines to in and out Vietnam ¬ To develop the fleet with the large and modern loading capacity, to invest more to cargo aircrafts to ensure the competent of exploiting equivalent to other size of the area airlines as Thai Airways, Eva-Air, China Airlines to achieve... exploited to transport passengers to combine with carrying cargoes from and to domestic locals to save costs of buying or hiring new planes ̇ To the international market, due to the demands of the cargoes transport by the airlines areas as predicted ( Table 12 - Appendix ) reach at rather high rate together with the prediction of the demands of the cargoes transport at the objective markets : Northeast... 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 output of the cargoes business and the annual growth rate of VNA; based on the Table 8 & 9 - Appendix, we see the output of the cargoes transport on the international airlines always occupies high density during years, the market. .. cargoes market of Vietnam Airlines as follows : OPPORTUNITIES (O) THREATS(T) 1 The rate of economic 1 The system growth and GDP of airline Vietnam adjusted reaches at high rate S the laws are in the direction of limiting the 2 Vietnam became the official of member of protection of the State to Vietnam Airlines WTO, is receiving the 2 The global tendency second investment wave, the capacity of cargoes transport . sector of the cargo transport of Vietnam Airlines up to 2015 as follows: ¬ To try to keep the stability of the market share of the domestic cargo transport of Vietnam Airlines (91% as at the. changes of opening the sky of the Government, after 2008 the market share will keep the rate of 50 -70% of the domestic the market share. ¬ To increase the rate of the market share of the cargo transport. propose solutions to expand the market for cargoes transport of VNA to aim at the objectives to 2015. 1.4 Research’s method of the project The author uses the methods of collecting material, information