Vietnam's aviation comes out of hibernation
The aviation sector is forecast to achieve the strongest recovery in the second quarter of this year. Meanwhile, in the stock market, many aviation stocks have surged.
|The aviation sector is forecast to achieve the strongest recovery in the second quarter of this year, with the most vital motivation being domestic transport.|
The worst is over
Aviation has always been mentioned in reports on sectors with a strong recovery possibility in 2022. The high Covid-19 vaccination rates and flexible anti-pandemic policies have facilitated economic recovery and development and supported the aviation sector’s recovery.
Its recovery was evident during the Lunar New Year holiday as airports were overwhelmed with passengers, airlines increased their flight frequency and the airfares on essential routes, such as Hanoi-HCMC, surged.
The aviation sector is forecast to achieve the strongest recovery in the second quarter of this year, with the most vital motivation being domestic transport. Local tourism promotion policies and the eventful domestic tourism market will continue fueling the recovery of the aviation sector, together with the recovery of international transport. The toughest period of the aviation sector has passed and it is now the most appropriate time to buy aviation stocks.
More specifically, once the frequency of flights increases, goods suppliers will report the highest growth, followed by airport ground service firms, aviation service and air caterers and air transport firms.
Investors will be keen on stocks capable of recovering well, shown through their high capacity and sustainable competitiveness. Another criterion is enterprises’ safe financial structure for fear that the air route reopening plan is not smooth, slowing down the pace of recovery.
Vietnam’s full reopening of international tourism from March 15 also throws airlines a much-needed lifeline. The Government had earlier approved pilot plans to welcome international tourists holding Covid-19 vaccine passports to Phu Quoc, Halong, Hoi An and Nha Trang to prepare for the tourism reopening.
Vietnam’s impressively high vaccination rates are a prerequisite for reopening the aviation sector and the economy as a whole.
According to VNDirect Securities Corporation, the number of international visitors to Vietnam is expected to surge over 150% over last year as Vietnam enters the new normal and the demand for travel recovers. In the 2023-2024 period, domestic arrivals may increase 7.6%-7.9% annually.
The number of foreign guests was expected to reach 13.1 million in 2022, well above the 0.2 million last year, and rise 11%-14.3% in the 2023-2024 period.
Positive rise in stock prices since early this year
During the Lunar New Year holiday, Vietravel Airlines increased flights on the Hanoi-HCMC and HCMC-Phu Quoc routes by nearly 53%, and the occupancy rate on these flights reached 92%.
The reopening of international travel as from February 15, 2022 is paving the way for the aviation sector to return to normality. Following the news about the reopening, many airlines worked out plans to resume international flights. Vietnam Airlines reopened air routes to 15 countries and territories, including the United States, Australia, Russia, the United Kingdom, France, Germany, Japan and South Korea. For air routes to Europe, there is one to two return flights per week, while the frequency is four to five flights per week on air routes to South Korea, Singapore, Cambodia and the United States.
Vietjet Air has resumed air routes from Vietnam to Japan, South Korea, Singapore and Taiwan with one flight per week. The air carrier also plans to increase the frequency of some other flights and reopen the air routes to some other countries. Budget carriers like Vietjet have been assessed to recover better thanks to their young fleets, fuel-saving aircraft and the domination in the domestic and international markets in short-haul flights. Furthermore, with a plan to expand its fleet by eight aircraft this year, Vietjet is sure to recover after the pandemic.
Following the trend, Bamboo Airways also believes in the recovery of the aviation market this year and has drawn up a plan to expand its flight network to nearly 40 international destinations. In Asia, the air carrier has been operating regular flights from Hanoi to Japan’s Narita, Taiwan’s Taipei and South Korea’s Incheon. It also launched nonstop flights between Hanoi City and Germany’s Frankfurt City on February 25, with a frequency of two flights per week.
In the stock market, many aviation stocks have surged, such as VJC closing the session on March 18 at VND148,000, up 16% over early this year. Meanwhile, SCS was priced at VND157,000, HVN at VND25,350, ACV at VND88,600 and AST at VND59,800, rising 5%, 10%, 10% and 13%, respectively.
Of them, ACV is seen as good for long-term investment, according to VNDirect, thanks to its possible steady recovery in the upcoming years given the reopening of international air routes, the possibility of its listing on HOSE at the end of 2022, its plan to pay dividends in shares and its growth potential when the progress of the Long Thanh International Airport project, a key public investment project, is accelerated.
The current risk of aviation stocks is the pandemic lasting longer than expected. However, with Vietnam’s solutions to safely and flexibly adapt to the pandemic and help the economy recover and develop, enterprises and investors can feel more secure and confident.
Vietnam's emerging and dynamic private sector proved its resilience during the Covid-19 pandemic as it helped the country become one of the few countries to obtain positive growth in 2020.
The aviation industry in Vietnam is expected to make a speedy recovery as more and more domestic and international travelers book flights to various destinations.