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VietNamNews

Domestic aviation recovery fuels competition

Update: January, 13/2014 - 09:17

Passengers embark from a Vietjet Air's flight. The domestic aviation market has significantly recovered, and growth in passenger transport is up 21 per cent. — VNA/VNS Photo

HCM City (VNS) — The domestic aviation market has significantly recovered, and growth in passenger transport is up 21 per cent.

It has opened up serious competition between national carrier Vietnam Airlines, and low fare airlines such as Vietjet Air.

Despite the strong competition among airlines and limited infrastructure for airports, Vietnam Airlines has reached its profit targets.

Turnover reached 98 per cent with over VND54 trillion (US$2.5 billion) but their profits increased 162 per cent, from their earlier target of VND98 billion ($4.7 million) to VND140 billion ($6.6 million) at the end of the year.

The airline transported 14.7 million passengers, of which nearly 8.8 million were local, an increase of 17 per cent on their original targets.

The percentage of domestic seat usage reached over 81 per cent and demonstrated that Vietnam Airlines has emerged unscathed from three sluggish years.

The airlines now takes 50 per cent market share for passenger transport, on both local and international flights. The recovery of Vietnam Airlines can be seen as a thermometer for the Vietnamese aviation market as a whole.

In 2013, the local aviation market made a swift recovery.

According to estimates from the Civil Aviation Administration of Viet Nam (CAAV), the total market for all four airlines in 2013 was 29.5 million passengers and 630,000 tonnes of cargo, increases of 16.7 per cent and 19.6 per cent respectively in comparison with 2012.

Of this figure, the local market has grew 19.3 per cent with 14.5 million of passengers.

The Minister for Transport, Dinh La Thang, confirmed that it was not just Vietnam Airlines who turned a profit. The youngest airline of the group, VietJet Air, revealed that they too made a profit last year.

In 2014, recovery speed for aviation is expected to be much faster, thanks to the improved global economic situation and a rise in tourists coming to Viet Nam.

"Competition in the market has sharply increased as VietJet Air has expanded their fleet and local routes," said Pham Viet Thanh, chairman of Vietnam Airlines' management board.

Vietnam Airlines' local market share dropped 7.3 per cent in 2013, leaving them with just 61.4 per cent of the market share.

At the same time, nationwide cost-saving measures have meant that many state staff from ministries, industries and state enterprises have shifted from national carrier Vietnam Airlines to low fare airlines like Jetstar Pacific and Vietjet Air.

"Competition with international and local low-fare airlines is really serious," Thanh added.

Vietnam Airlines predicts that in 2014, they will lose more than 6.4 per cent of local passengers and by the end of the year will only have 55 per cent of market share.

Meanwhile, VietJet Air's local passenger market share has increased 9 per cent up to 25 per cent, in comparison with 16 per cent in 2012.

Experts predict that in 2014, the local aviation market will witness stronger competition between Vietnam Airlines and VietJet Air.

Despite low fares, good quality airplanes and service, VietJet Air won't be able to satisfy the 3.2 million passengers they had in 2013 and so they plan to introduce two more Airbus 320s to the fleet in the fourth quarter of this year.

However, Vietnam Airlines still dominates the aviation market as they are big share holders at two other airlines, Vietnam Air Service Company (VASCO) and Jetstar Pacific, as well as owning all the logistic services.

"Customers will benefit from the increased competition," the expert said. — VNS



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