The ‘take off’ road back of Vietnamese airlines

“We have a new demand!”, Ms. Luong Thi Xuan, General Director of Vietnam Aviation Exhibition Joint Stock Company (VAE) commented when witnessing recently, many new routes, services, and contracts. Undisclosed business or airline expansion, from intercontinental cargo to luxury passenger…

Like the world, Vietnam’s aviation industry has experienced two quiet years because of the epidemic. After Covid-19 appeared, Vietnam stopped regular international flights starting from April 2020. By 2021, the number of customers will not be the lowest in history, reaching only 15.9 million, which is a decrease of more than half compared to 2020. In which, foreign visitors decreased by 96.5% and domestic customers decreased by 50.5%.

The Government has joined in support with moves such as 50% reduction in take-off and landing prices and domestic flight operating service prices; apply environmental protection tax on jet fuel equal to 70% of the prescribed rate and continue to extend it for 2021. In addition, policies to support businesses in restructuring loan repayment terms, exemption and reduction of interest and fees loan… is also given.

By the fourth outbreak in the third quarter of 2021, domestic flights will stop from August 30. The Ministry of Transport and Communications will begin a limited resumption test on October 10, 2021. In the first 10 days, only one round trip is allowed for 19 domestic routes (compared to 58 routes in 2019).

After that, the frequency of domestic flights was gradually increased to every 2 weeks to meet the rapidly recovering transport demand in Vietnam.

Domestic travel demand after Vietnam’s transition to the “new normal” exceeded forecasts – especially during the Lunar New Year. Airlines had a bustling Lunar New Year period from January 29 to February 2, recording 10,711 domestic flights – 69% higher than the 2021 Lunar New Year, according to the Vietnam Flight Management Corporation. .

International visitors also gradually return. The pilot program from January 1 connects Vietnam with 9 countries and territories with a frequency of 4 flights a week for each route. According to the General Statistics Office, in the first quarter, international visitors to Vietnam reached nearly 91,000 arrivals, an increase of 89.1% over the same period last year. In which, visitors arriving by air accounted for nearly 90.5%, up to 165.2%.

“The above positive moves contribute to strengthening confidence in the aviation industry’s brighter picture in the new year, leading the recovery wave,” commented Mr. Nguyen Huu Nam, deputy director of VCCI Ho Chi Minh City, last week. .

Regarding this year’s prospects, according to a report of Bao Viet Securities (BVSC), if the pilot process is favorable, and the new variants are not too dangerous, international routes can recover strongly. starting from the end of the second quarter to the beginning of the third quarter. This unit forecasts that the number of domestic and international passengers in 2022 will be 30 million and 5 million passengers, up 89.9% and 4,661% respectively over the same period.

BVSC believes that cargo businesses will have the best growth when the frequency of flights is increased, then ground services, airline services and airline meals, and last. Air transport businesses will eventually recover.

According to estimates by Viet Capital Securities (VCSC), the number of domestic flights has recovered to 94% compared to pre-pandemic levels, ie 2019. VCSC forecasts, the total domestic output of Vietnam Airlines and Vietjet Air this year reached 92% and 91% compared to 2019; and the combined international output of both equals 44%.

According to Mr. Nguyen Phuoc Thang, Head of Science and Technology Department of the Civil Aviation Administration, the international aviation market is reopening, but due to the profound impact of the epidemic, it has only just begun. However, he thinks the market will recover very quickly. “It can be assessed that from now until the end of August, airlines will focus all their fleets on increasing flights for tourist routes,” said Thang.

But there are still some challenges with Vietnamese airlines. The first is the source of visitors in markets that are the driving force of Vietnam’s tourism. Before the epidemic, the major tourist markets were South Korea, Japan, China, Russia… Of which, more than half (according to 2019 data) were visitors from China and South Korea.

However, with China’s “Zero Covid” policy and South Korea’s still tight border management, these two sources are not very promising in the short term. In addition, the Ukraine crisis may also affect the number of visitors from Russia.

However, VCSC believes that Vietnam’s tourism industry can see good developments in the short term by diversifying the number of visitors while waiting for the big traditional markets to reopen. According to Google Destination Insights, the US and countries in Europe are among the countries with the highest demand for information on accommodation and air travel to Vietnam since Vietnam announced its reopening. .

The second factor is the price of fuel. Fuel is the largest cost component of airlines in Vietnam, accounting for 29% and 43% of the average total cost of Vietnam Airlines and Vietjet Air respectively in the period 2015-2019.

In January 2022, the average price of jet fuel rose to about 101 USD per barrel, significantly higher than the 77.8 USD forecast by IATA in October 2021. Analysts also believe that the increase in jet fuel prices will have a big impact on fares in 2022.

In addition, according to experts, in the long term, the aviation industry will face rising labor costs, labor shortages, or the overload of some existing airports are also other challenges.

During the announcement of the second International Aviation Exhibition (VIAExpo) – an event that will take place in September – the Italian Consular Commercial Counselor Representative in Ho Chi Minh City said that surrounding countries such as Thailand, Singapore opened earlier and welcomed guests faster. Therefore, Vietnam needs to accelerate and further promote readiness factors from policy to infrastructure. “I would like to see important airports like Noi Bai and Tan Son Nhat be expanded,” he said.

Meanwhile, Ms. Luong Thi Xuan, General Director of Vietnam Air Exhibition Joint Stock Company (VAE), assessed that the aviation industry needs to pay more attention to the market of aircraft for agriculture, private aircraft for people. In order to do this, it is necessary to develop more human resources and attract investment opportunities for manufacturing spare parts and aviation maintenance services to Vietnam.

Therefore, trade promotion activities for promotion are necessary. Although Vietnam has started to organize air shows, the scale is still modest compared to the market of 100 million people and is not considered a real “Air Show”, because only because there are booths in the air show. Exhibitors.

Major General Hoang Viet Quang, Deputy Director of the Operations Department, General Staff, said that Vietnam can actually do “Air Show” thanks to its geopolitical position and vibrant aviation market.

“For many years now, many large foreign enterprises have also come to Vietnam to meet the Government, and the Ministry of Transport proposed the idea of ​​organizing an ‘Air Show’ in Vietnam,” he said.

However, infrastructure and air traffic conditions are not favorable. An attractive international “Air Show” requires the display of aircraft on the ground and performances in the air. Regarding the ground display, the whole country does not have a suitable place because even Tan Son Nhat or Noi Bai airports are always overloaded and busy.

Performance is also a difficult problem, because Vietnam has a narrow horizontal area but has more than 40 domestic routes. These routes are thick, so it is difficult to stratify so that there is more space for exhibition aircraft to perform without affecting daily civil and military aviation operations. Therefore, the biggest expectation to soon have an “Air Show” will only be realized when Long Thanh Airport comes into operation.

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