Airlines suffer losses due to rising fuel prices

July, 01/2022 - 09:33
Vietnamese airlines are suffering losses of hundreds of billions of đồng each month due to a surge in fuel prices

 

Skyrocketing jet fuel prices have pushed airlines into difficulties as fuel costs accounted for 40-50 per cent of operating costs. — VNA/VNS Photo

HÀ NỘI —  Vietnamese airlines are suffering losses amounting to hundreds of billions of đồng each month due to a surge in fuel prices, according to the director of the Civil Aviation Authority of Việt Nam (CAAV) Đinh Việt Thắng.

At a conference of the transport ministry reviewing its work in the first half of the year earlier this week, Thắng said that fuel costs accounted for 40-50 per cent of operation costs, and revenue increases were insufficient to compensate for high fuel prices.

He said domestic aviation transport had recovered with higher growth than in the pre-pandemic period. However, Vietnamese carriers had not fully escaped difficulties due to the slow recovery of the international market.

It was estimated that domestic carriers suffered a loss of nearly VNĐ100 billion per month on skyrocketing jet fuel prices.

Trần Thanh Hiền, the chief accountant at Vietnam Airlines, said Jet A1 prices averaged $72 per barrel in 2021, and carriers developed the scenario where the average jet fuel price was $110 for 2022. However, the fuel price reached $162, two times higher than last year.

If fuel prices keep increasing and are maintained at a high level for a long time, no carriers will earn a profit, Hiền said.

As domestic airlines were struggling with high fuel prices, the CAAV proposed the Ministry of Transport consider reducing the environmental tax on fuel together with gradually loosening caps on domestic ticket prices so that airlines could be more flexible.

Lê Hồng Hà, general director of Vietnam Airlines, said that loosening the air ticket ceiling would reflect competition in the air transport market. This would help airlines to collect surcharges on customers who could afford it and be an opportunity for the carriers to widen the price fluctuation range.

Bùi Doãn Nề, Deputy President of the Việt Nam Aviation Business Association, said high fuel prices were a real challenge as domestic airlines had just gone through more than two years of difficulty due to the pandemic and had not yet recovered.

It was reported at the conference that in the first half of the year, the number of monthly international air passengers had increased from 103,500 in January to 127,000 in February, 224,600 in March, and 445,700 in April, 650,000 in May and an estimated 826,000 in June.

At the end of June, more than 30 foreign and four Vietnamese airlines were operating 96 international routes between Việt Nam and 21 countries and territories. Vietnamese carriers were using 68 international routes to 16 countries and regions.  

In the domestic market, six Vietnamese carriers were operating 55-60 routes connecting Hà Nội, Đà Nẵng and HCM City with 19 local airports. The lifting of pandemic-related restrictions, along with booming demand, was bringing about a fast recovery of domestic aviation transport, with the number of domestic passengers growing from 10-15 per cent each month in the second quarter.

The number of air passengers going through Vietnamese airports was expected to reach 70-80 million this year, including 8-10 million international travellers. — VNS