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Vietnam is accelerating reforms to attract fresh investment into its aviation sector, with proposed changes to foreign ownership caps and a new insolvency framework designed to support airline restructuring and underpin a more durable post-pandemic recovery.
Draft Ownership Reforms Target Capital Injection
Under a draft decree on commercial air transport now under public consultation, Vietnam is considering lifting the ceiling on foreign ownership in domestic airlines from 34 percent to 49 percent, bringing the country broadly in line with several regional peers. Officials argue that a higher cap would help unlock fresh equity from strategic partners at a time when multiple carriers are searching for long term investors.
The proposed revision would allow foreign investors to hold up to 49 percent of a carrier’s charter capital, reversing a more restrictive position introduced in recent years and echoing earlier rules that permitted such levels. Policymakers have framed the move as a calibrated liberalization that preserves regulatory oversight while signaling greater openness to cross border capital and expertise.
Industry executives and analysts have long pointed to the existing 34 percent cap as a practical barrier to large scale airline rescues, limiting foreign shareholders’ ability to exert meaningful influence over governance and restructuring. Former Bamboo Airways executives and other insiders have publicly argued that the low ceiling curbed veto rights and discouraged deep operational involvement from would be partners just as carriers confronted heavy losses and mounting debt.
The draft decree also revisits minimum equity thresholds tied to fleet size, proposing that airlines with up to 30 aircraft maintain at least 300 billion dong in equity, while those operating 31 or more aircraft hold no less than 700 billion dong. By decoupling equity requirements from incremental fleet bands and aligning them with broader restructuring needs, regulators aim to balance safety and solvency concerns with the flexibility required for expansion.
Restructuring Pressures Mount Across Vietnam’s Carriers
The ownership debate comes as Vietnam’s aviation market navigates a complicated recovery. Flag carrier Vietnam Airlines has reported improving passenger demand and yields, but still faces high financing costs and a legacy of pandemic era losses that require additional capital and a sustained restructuring push. Plans to increase charter capital, alongside similar moves by private carrier Vietjet and the Airports Corporation of Vietnam, underscore the scale of funding needed to modernize fleets and infrastructure.
Smaller and newer airlines are under even greater pressure. Bamboo Airways has been through an extended restructuring, shrinking its fleet, suspending most international services and refocusing on core domestic routes while it seeks fresh investors and a stable ownership structure. Vietravel Airlines, Pacific Airlines and other niche operators are likewise reassessing network strategies and capital needs as competition intensifies.
At the same time, new private sector entrants have begun to reshape the competitive landscape. The rapid build up of Sun PhuQuoc Airways, which expanded from no aircraft to a modest fleet within months, reflects both investor confidence in Vietnam’s tourism potential and the risks of overcapacity in a price sensitive market. Analysts note that without clearer paths to restructuring and recapitalization, the sector could face a wave of distress that undermines service quality and network reliability.
Vietnam’s pre pandemic growth trajectory, with double digit expansion in passenger numbers, remains a powerful draw for investors. Forecasts from regional and global industry bodies suggest that the market could nearly double by the mid 2030s. Yet the experience of recent years has highlighted the need for stronger financial buffers, more flexible corporate rescue tools and a regulatory framework that can accommodate both state backed incumbents and agile private carriers.
New Insolvency and Investment Laws Aim to Support Turnaround
Beyond sector specific rules, Hanoi is overhauling core elements of its investment and insolvency architecture in ways that could directly shape airline restructurings. A new Law on Rehabilitation and Bankruptcy, due to take effect in early March 2026, introduces a debtor led rehabilitation regime intended to facilitate earlier intervention and structured workouts before companies slide into outright insolvency.
The law provides for court supervised rehabilitation with an automatic stay on enforcement actions once proceedings are accepted, giving distressed firms breathing room to negotiate with creditors. Although much of the initial commentary has focused on manufacturing and real estate, aviation specialists see potential for the regime to support complex airline restructurings that require coordinated treatment of secured lenders, lessors and trade creditors.
In parallel, the newly adopted Law on Investment 2025, which begins to take effect from March 2026, refines Vietnam’s broader investment framework by clarifying conditional business lines, delegating more approval powers to local authorities and seeking to reduce administrative bottlenecks. Legal practitioners say the shift is meant to enhance transparency and predictability for foreign investors, including those considering long horizon commitments in capital intensive sectors such as aviation.
Complementary decrees issued in early 2026 set out targeted incentives for private sector development and for strategic initiatives such as planned international financial centers. While these measures are not aviation specific, they form part of a wider effort to channel private and foreign capital into infrastructure, logistics and high value services, all of which intersect with the long term prospects of Vietnam’s airlines and airports.
Long Term Recovery Tied to Infrastructure and Tourism Growth
Any regulatory shift on airline investment is unfolding alongside one of Southeast Asia’s most ambitious transport infrastructure build outs. Vietnam is investing heavily in airport upgrades and new capacity, including the phased development of Long Thanh International Airport near Ho Chi Minh City and the recent expansion of domestic facilities at Tan Son Nhat. These projects are designed to ease congestion, accommodate rising passenger volumes and position the country as a regional transit and tourism hub.
The government’s broader development agenda emphasizes attracting high tech manufacturing, services and international finance, supported by a nationwide program of expressways and logistics corridors. Aviation is seen as both an enabler of this strategy and a beneficiary, linking industrial zones and tourist destinations to key markets in Asia, Europe and North America.
Tourism authorities are simultaneously working to diversify source markets and extend visitor stays, banking on Vietnam’s beaches, heritage sites and emerging secondary cities to drive demand for both full service and low cost air travel. Policy measures tightening penalties for illegal overstays and improving customs and tax administration are intended to reinforce a more rules based environment for international visitors and travel businesses.
Industry observers caution, however, that infrastructure expansion alone will not guarantee sustainable airline profitability. Fuel price volatility, currency risks, and intense fare competition continue to weigh on margins. For many carriers, access to new equity and flexible restructuring tools will be as important as route rights or airport slots in determining their ability to weather future shocks.
Balancing Openness With Oversight
As Vietnam evaluates higher foreign ownership limits and embeds new bankruptcy and investment rules, officials face the challenge of striking a balance between openness and oversight. A more generous equity cap could accelerate recapitalization and bring in operational expertise from established global airlines, but it also raises questions around national interest in a strategically sensitive sector.
Regulators have signaled that increased foreign participation would be accompanied by continued scrutiny of safety, competition and consumer protection. The draft aviation decree preserves key licensing and monitoring powers for domestic authorities, while the broader legal reforms aim to ensure that distressed companies, including airlines, can be restructured in an orderly and transparent manner.
For now, investors and carriers are watching closely to see how quickly the draft measures are finalized and how consistently they are implemented. If successfully executed, the evolving investment rules could ease the path to restructuring for Vietnam’s airlines, support long term industry consolidation on healthier terms and reinforce the country’s ambition to emerge as one of Asia’s most dynamic aviation markets.