VietNamNet Bridge - …is the big worry about the market decline not only of fledgling air carriers like Air Mekong or Vietjet Air, but also of the national air flag carrier Vietnam Airlines, which is holding more than 70 percent of the market share.

Big sale promotion campaigns launched

Over the last three years, passengers have been regularly enjoying big airfare discounts offered Vietnam Airlines.

The national air carrier has reported that hundreds of thousands of air tickets with the price discounts of up to 50 percent are sold every year.

The big sales promotion campaigns run by Vietnam Airlines have helped stimulate the demand, but they have put big difficulties for other air carriers, which also had to follow the move by lowering their airfares, and for Vietnam Airlines itself.

Indochina Airlines, which had to stop operation just after one year of providing commercial flights, once complained that it could not sell tickets at higher prices to make profit, because of the cutthroat competition in the aviation market.

Vietnam Airlines is now holding more than 70 percent of the domestic market share, considered the “eldest brother” among the air carriers. This explains why Vietnam Airlines announces air discount campaigns; other airlines also have to launch sales promotion programs.

Jetstar Pacific, known as a budget airline, which always tries to cut down expenses, also admitted that it could not bear the air ticket price reductions in a large scale offered by the eldest brother.

Since the airline sold tickets at low prices, the turnover was not high enough to cover expenses. This, plus the management problems, both have made the airline take loss continuously in the last few years. Meanwhile, the air carrier has anticipated that the loss would not be less than 9 million dollars in 2012.

Vietjet Air, a new comer on the market, also had to attract more passengers by launching a series of sales promotion campaigns, offering the air tickets with surprisingly low prices of 19,000 dong or 350,000-900,000 dong for domestic flights.

Right after Vietjet Air raised the flight frequency, Vietnam Airlines also launched a sales promotion campaign for the autumn season, under which 300,000 air tickets were sold at the prices of 550,000-950,000 (one way), not including taxes and fees.

However, in fact, passengers can still fly at “reasonable costs,” even if they do not book tickets in August. Obtaining the tickets for the Hanoi-HCM City flights at just 1.2 million dong, including taxes and fees is within reach of passengers.

Especially, passengers can fly with the national flag air carrier Vietnam Airlines instead of a budget airline, with just 1.3-1.5 million dong on the same route.

Air Mekong and Jetstar Pacific have not run sales promotion campaigns noisily, but they have adjusted the airfares to make the air tickets reasonably cheap to passengers, with the gaps between the airlines’ ticket prices and Vietnam Airlines’ lowest airfare rates hovering around 300,000-600,000 dong.

Continued loss anticipated

Explaining the currently applied flexible airfare pricing policy, an executive of Vietnam Airlines said the competition has become fiercer and stiffer on both the international and domestic routes.

The executive said that its international air routes have been influenced by the global political and economic changes and the appearance of new competitors. Therefore, instead of expecting high profits from international flights to offset the loss in domestic flights, Vietnam Airlines needs to improve the exploitation efficiency of the flights on domestic routes.

In a recent report, Vietnam Airlines said its domestic transport output would be 7.5 percent lower than the targeted output set up in the yearly business plan.

With Vietjet Air’s more aircrafts put into operation and the market decline of 2.6 percent in the first six months of the year, Vietnam Airlines’ number of passengers was 5.8 million only, just fulfilling 96 percent of the plan.

US$1 = VND20,800

Compiled by Kim Chi