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VN aviation sector prepares for post-pandemic period

According to data from Airbus in collaboration with the International Air Transport Association (IATA), Vietnam's domestic aviation market has recovered the fastest in the world, with a growth rate of 123% over the same period in 2019.

Increased demand

Illustrative image


Only on September 4, HCM City’s Tan Son Nhat International Airport operated 747 flights, including 372 departure flights and 375 arrival flights, serving more than 121,000 passengers. This was the day with the highest number of passengers during the National Day holiday and was a record high for the past several months.

At the same time, Hanoi’s Noi Bai International Airport had 429 domestic flights (including 215 departures, 214 arrivals) and 73,000 arrivals.

After Vietnam opened the door for international tourists, domestic flights made a breakthrough. According to the Civil Aviation Authority of Vietnam (CAAV), in the first half of 2022, domestic airlines transported 20.1 million passengers, up 56.1% over the same period in 2021.

The number of international visitors reached 667,000 people, with a growth rate of 1,033%. Domestic tourists reached 19.5 million, up 51.8%. It is forecast that in 2022, airports across the country will receive 87.8 million passengers, an increase of 190% compared to 2021.

Tom Sanderson, Boeing's marketing director, said that Vietnam has a good foundation for aviation development in terms of passengers and volume of goods to be transported, as well as the number of aircraft. The growth rate of its aviation industry is 5-7 times higher than the regional average.

He said in the next 20 years, Southeast Asia will buy about 4,200 new aircraft, of which Vietnam will account for a significant proportion.

The race for market share 

The local aviation market is shared by four airlines: Vietnam Airlines (Vasco and Pacific Airlines), Vietjet Air, Bamboo Airways, and Vietravel Airlines. 

According to the Civil Aviation Authority of Vietnam, in the first half of 2022, the Vietnam Airlines group retained top market share with 46 percent (a drop of 1 percent compared to 2021). Vietjet improved its market share by 4 percent to reach 36 percent. However, Bamboo Airways market share fell from 20 percent to 17 percent.

After two years of the pandemic, domestic airlines are making plans for a pre-pandemic recovery. Vietjet Air, owned by billionaire Nguyen Thi Phuong Thao and Boeing, signed a restructuring agreement, and has continued its contract to order 200 Boeing 737 aircraft.

Under the plan, Vietjet will receive Airbus A330 planes, bringing the total number of wide-body aircraft to three. It is expected that by the end of 2022, Vietjet will operate 78 aircraft (including Airbus A321 and A330).

Vietravel Airlines, owned by businessman Nguyen Quoc Ky, has three aircraft and is planning to expand its fleet to five in the next few months. Taking advantage of the recovery of the aviation and tourism markets, and its parent company Vietravel's business, which was up in the second quarter, Vietravel Airlines expanded its local routes in the summer.

Bamboo Airways, with the participation of Duong Cong Minh, is expecting a breakthrough. The airline plans to increase its fleet to 35 aircraft by the end of 2022, 42 by 2023, and 100 by 2028.

Meanwhile, Vietnam Airlines, which has the highest market share, is reducing its number of aircraft. The airline is looking for sources of revenue, including liquidation of aircraft and aircraft engines, and financial investments.

Vietnam Airlines has sold 1 aircraft, sold the right to buy and lease back an aircraft engine, liquidated the investment in Cambodia Air and collected a part of the amount of more than VND860 billion. This airline is negotiating to cancel the receipt of 4 Boeing B787 and Airbus A320 aircraft.

In fact, 2 years of the epidemic has seriously affected the liquidity of airlines. They have struggled to have financial resources and cash flow to maintain operations.

According to the 2022 semi-annual financial statement, short-term debt of Vietnam Airlines is VND36,425 billion, exceeding short-term assets. Its equity is -VND4,897 billion. Overdue payables exceeded VND 14,850 billion. During the period, the group also recorded a loss of VND5,237 billion in business results. Weak financial results put HVN shares at risk of being forced to delist because of losses for 3 consecutive years.

According to Pacific Airlines' audited financial statements for 2020 and 2021, the airline's equity is - VND2,275 billion and - VND4,583 billion, respectively. Bamboo Airways still owes its ground service, meals providers... In 2021, this airline recorded a gross loss of VND 4,060 billion.

According to a representative of Vietravel, the international market has not recovered, fuel prices spiked, the average fuel price nearly doubled over the same period, sometimes accounting for 65% of flight revenue, so despite its business recovered in the second quarter of 2022, the firm’s revenue has not yet made up for expenses.

Local airlines are implementing their own plans. In addition to opening more routes, Vietjet expects to have a positive profit in the air transport segment in 2022. Vietravel Airlines has just signed a cooperation agreement to invest in and develop air cargo services (VUAir Cargo). Vietravel Airlines General Director Vu Duc Bien said that the air cargo market still has a lot of potential and has not been fully exploited.

After taking on the role of Mr. Duong Cong Minh, Bamboo Airways aims to continue to promote and open new international routes to Asia, Europe, Australia and further to the Americas.

From now until the end of the year, Vietnamese airlines will still have to face many challenges such as a sharp increase in oil prices, tightened monetary policy, and high inflation. Key markets such as Japan, Korea, China, Taiwan... still maintain restrictive policies on entry and exit.

Continuing growth remains a challenge for airlines. They will have to balance between high operating costs on the one hand and low-ticket prices to stimulate demand. Besides, maintaining a higher liquidity position will be a mandatory factor for airlines after lessons learned from the Covid-19 pandemic.

According to SSI Research, profit growth of airlines in 2023 will be stronger than in 2022, but will not return to pre-Covid-19 levels until the end of 2023.

Ha Yen

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