VietNamNet Bridge - Analysts now bet on the fate of Air Mekong after hearing that the private airline cannot pay for fuel. Pacific Airlines still has reported loss for the last five consecutive year of operation.

Vietnamese market too severe to airlines (part 1)


Jetstar Pacific, a budget airline on January 13 held a press conference to inform about the renovation of the fleet. The shareholders of Vietnam Airlines Corporation, which is now the owner of Jetstar Pacific, have decided that the airline would only use A320 instead of both A320 and B737-400 like it did in the past.

Jetstar Pacific was established as an airline independent from Vietnam Airlines, the national flag air carrier. However, the government then decided to put Jetstar Pacific under the control of Vietnam Airlines in an effort to restructure the enterprise and save it from sinking due to the big losses.

When asked about the business plan in 2013, Jetstar Pacific’s General Director Le Hong Ha said the market demand has been much weaker so far this year in comparison with the last year. Reports showed that the number of passengers flying on the first 10 days of the year decreased by 7-10 percentage points.

Therefore, Ha simply said that the airline will not put overly high hope on the business performance in 2013.

“We have adjusted our business plan to go a bit more slowly. In the immediate time, we strive to optimize the exploitation of the five Airbus 320. Next, we will continue the plan to develop the fleet approved by the shareholders,” Ha said.

“It is expected that we would have 15 aircraft for our fleet by the end of 2015, which means that we would have five more aircraft in each year of 2014 and 2015,” he said.

Repeating that Jetstar Pacific would have only five aircraft for 2013, Ha said that this is a “small step back” by the airline which now focuses on strengthening its force in the context of the weak market demand and prepare for the next development stages.

Ha also mentioned the possibility of the airlines to develop international air routes, emphasizing that this is a necessary measure to ensure the successful business performance of the airline.

Ha said in early March, when the summer flight schedule kicks off, Jetstar Pacific would begin providing the flights from HCM City to Singapore, from Singapore to Jakarta (Indonesia), and vice versa, with the expected frequency of one flight a day.

The statements by the manager of Jetstar Pacific can partially show the difficulties the airline is facing.

“Jetstar Pacific had been taking loss for the last four consecutive years. We took over Jetstar Pacific last year, and Jetstar Pacific once again took loss,” said Duong Tri Thanh, Chair of the Board of Directors of Vietnam Airlines Corporation.

“I can say for sure that we still cannot break even with domestic airlines in 2013 with the current sale prices and the increasingly high input costs. The fuel alone accounts for 40 percent of our total costs,” Thanh said.

In general, no airline in Vietnam can make profit with domestic air routes, from Vietnam Airlines, Jetstar Pacific to VietJet Air or Air Mekong and Indochina Airlines.

This explains why Jetstar Pacific has only set up a modest business target for 2013, while considering exploiting international air routes to step by step make profit