Is the 'hot' development period of the aviation market over?

Vietnam’s aviation market has shown signs of a growth slowdown since 2017 after a hot development period that extended to 2016.

In 2013-2016, the domestic aviation market witnessed impressive growth rates of 12.6-29.1 percent. The sharpest growth was seen in low-cost carriers (LCC) with the growth rate once reaching a peak of 38 percent.

Is the 'hot' development period of the aviation market over?

However, the golden days of the market when the number of passengers soared, are over. In 2017, the aviation market grew by 9.9 percent, and in 2018, the figure dropped to 6.9 percent.

The latest Q1 report of the Civil Aviation Authority of Vietnam (CAAV) showed a sharper decline. The passenger transport output was 12.5 million, a modest increase of 4.4 percent compared with the same period last year. Of this, international passenger transport output increased by 8.4 percent and domestic passengers 2.4 percent only.

Thoi Bao Kinh Te Sai Gon quoted a senior official of CAAV as saying that the hot development of the aviation market some years ago was mostly seen in the LCC market segment, while there wereno big changes seen in the traditional market.

The Ministry of Transport (MOT) is planning to adjust the aviation market development program after 2020, under which the growth rates would decrease to one-digit levels.

The Ministry of Transport (MOT) is planning to adjust the aviation market development program after 2020, under which the growth rates would decrease to one-digit levels.

The prospectus released by Vietnam Airlines on May 7 when at the HOSE bourse showed that Vietnam Airlines, Jetstar Pacific and VASCO hold 55.3 percent of market share, leading the aviation industry.

The prospectus showed that Vietnam Airlines got VND98.95 trillion in revenue in 2018, and VND3.312 trillion in pre-tax profit, a record high over the last 25 years of operation.

 

Analysts noted that after equitization and shifting to operate as a joint stock company (2015-2018), its pre-tax profit increased by 111.5 percent, despite the decrease in passenger transport output (96.4 percent of plan) and in revenue (84.6 percent).

The company cut transport output, flexibly allocating transport capacity to ensure the overall efficiency of the entire network.

The airlines of Vietnam in the domestic market mostly compete on the backbone route of Hanoi – HCM City – Da Nang. As for international air routes, they compete with destinations in Southeast and Northeast Asia.

On the Hanoi - HCM City route, a report found that 48 percent of passengers fly with Vietnam Airlines. Of these, 73 percent of passengers have medium- and high-income levels, while 9 percent fly with Jetstar.

Thanh Mai

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