Vietnam’s aviation industry struggles to move up the value chain

Vietnam’s Aviation Industry Struggles to Move Up the Value Chain

At a recent roundtable conference titled “From Aspiration to Opportunity in Developing the Aviation Industry,” held at the National Exhibition Center, Tran Hai Dang, CEO of Aviation Engineering Services Corporation (AESC), outlined both the potential and persistent challenges confronting Vietnam’s aviation sector. Despite the country’s strategic location, skilled technical workforce, and favorable investment climate, Vietnam’s integration into the global aviation supply chain remains limited and underdeveloped.

Dang described Vietnam’s current role in the aviation industry as “modest and unclear.” Only a small number of domestic companies are involved in manufacturing airframe components or conducting engine testing, and their output is insufficient to support a comprehensive aviation ecosystem. Presently, just five Vietnamese firms produce limited airframe parts, while engine manufacturing is confined to initial testing programs. In critical segments such as aviation electronics, advanced materials, rubber, and specialized coatings, Vietnamese participation is virtually nonexistent. A significant barrier to progress is the absence of a unified national program for aircraft development. Existing efforts are fragmented and lack a cohesive strategy. “We must acknowledge that the country still doesn’t have a comprehensive plan for building a real aviation industry,” Dang emphasized.

Lagging in MRO and Infrastructure

Vietnam’s maintenance, repair, and overhaul (MRO) capabilities remain underdeveloped. Only two major facilities—Vietnam Airlines and AESC—operate at scale, while other players are small and lack the necessary infrastructure and certifications. These developments have largely been market-driven rather than the result of coordinated national planning. Dang cautioned that continued focus on basic manufacturing, without substantial investment in infrastructure and technology, will confine Vietnam to low-value segments of the aviation industry.

A telling example of this limitation is Vietnam’s inability to produce a $100 bolt used in commercial aircraft wheels, a component that could be manufactured domestically with relatively modest investment. “It’s not about capability—it’s about commitment,” Dang remarked.

Certification and Competitive Pressures

Securing international certifications from regulatory bodies such as the International Air Transport Association (IATA), the Federal Aviation Administration (FAA) in the United States, and the European Union Aviation Safety Agency (EASA) remains a significant hurdle for Vietnamese firms. The certification process is costly, time-consuming, and offers uncertain returns, making it difficult for local companies to compete on the global stage. Dang proposed that domestic aviation businesses collaborate by pooling resources and sharing certifications to avoid redundant competition and accelerate progress. He advocated for a national aircraft development program structured around a core nucleus supported by a satellite network of enterprises.

Navigating Market Competition and Talent Challenges

Vietnam’s aviation industry also faces increasing challenges from intensified market competition, continued reliance on contract manufacturing, and difficulties in attracting and retaining skilled talent. While the broader manufacturing sector continues to attract significant foreign direct investment—potentially creating opportunities for the aviation industry to ascend the global value chain—these prospects can only be realized if the sector addresses its structural weaknesses and improves localization rates.

The Call for a National Blueprint

Uong Viet Dung, Director of the Civil Aviation Authority of Vietnam, highlighted that the country currently operates 14 commercial and specialized airlines with a fleet of 254 aircraft, a number expected to rise to 400 by 2030. Vietnam’s aviation network encompasses 52 domestic and 211 international routes, generating strong demand and opportunities for local manufacturing and supply.

With low labor costs, shifting global supply chains, and the emergence of green aviation technologies, Vietnam possesses strategic advantages. However, industry leaders concur that a clear and coordinated national strategy is essential for the country to move up the value chain and establish itself as a major regional aviation hub.