A Government Office release says Deputy Prime Minister Trinh Dinh Dung has "agreed in principle" with the temporary suspension as proposed by the Transport Ministry in mid-May.

The rationale for the proposal was that the existing domestic carriers have suffered heavy losses because of the Covid-19 pandemic and it would take at least two years for the aviation market to recover to 2019 levels.

The Deputy PM asked the ministry to take responsibility for its recommendations on ensuring developing the aviation industry.

In its proposal the ministry estimated Vietnam’s aviation industry to serve 42.7 million passengers this year, down 46 percent year-on-year. Of this, domestic carriers are expected to serve 32.6 passengers, down 40 percent.

Under the most optimistic scenario, the transport ministry said, Vietnam’s aviation market would only recover to reach 2019 figures after two years. The ministry said now it needs to focus on supporting existing airlines to overcome difficulties caused by the Covid-19 crisis.

Regarding KiteAir, an airline established by hospitality group Thien Minh, Dung assigned the Ministry of Planning and Investment, as an investment proposal appraisal agency, to report to the PM about the project based on the transport ministry's proposal. This could mean that the firm's investment proposal can only get approval by 2022 at the earliest.

For Vietravel Airlines, which received in-principle approval from the PM in early April, the Civil Aviation Authority of Vietnam had evaluated its documents, determined they are appropriate, and proposed the transport ministry to carry out follow-up steps to license it.

Vietnam currently has five airlines in operation: Vietnam Airlines, Jetstar Pacific, Vietjet Air, Vietnam Air Services Company (VASCO) and Bamboo Airways.

Airports across Vietnam served near 116 million passengers last year, up 12 percent from 2018, with Vietnam Airlines and Vietjet Air dominating the market.