Aviation industry rebounds in Q2 thanks to opening of routes

August, 22/2022 - 10:26
The restoration of flights and increased number of passengers are helping airlines and non-aviation businesses to gradually recover in profit after the pandemic.
Passengers disembark a Vietnam Airlines flight at Tân Sơn Nhất Airport in HCM City. VNA/VNS Photo

HÀ NỘI - The restoration of flights and increased number of passengers are helping airlines and non-aviation businesses to gradually recover in profit after the pandemic.

According to the Civil Aviation Administration of Việt Nam, in the first six months of this year, the total number of passengers in the industry reached 23.3 million, up 74.2 per cent over the same period in 2021 and equal to 60 per cent compared to the same period in 2019. The domestic market saw 20.8 million passengers, an increase of 58.4 per cent compared to the first six months of 2021 and an increase of 12 per cent over the same period in 2019.

The total cargo transported in six months was estimated at 651,000 tonnes, up 6.8 per cent over the same period in 2021 and up 7 per cent over the same period in 2019, of which the domestic market accounted for 146,900 tonnes, up 3.6 per cent compared to the first six months of 2021 and down 29 per cent over the same period in 2019.

According to the Civil Aviation Administration of Việt Nam, the domestic market began to recover from April, grew again in May and had strong growth in June. In June alone, the domestic market welcomed 5 million passengers, an increase of 20.9 per cent compared to May and an increase of 38.8 per cent compared to June 2019 - the peak summer month before the COVID-19 pandemic. The seat occupancy rate on domestic routes in June was high, ranging from 85 per cent to 87 per cent depending on the airlines.

Lê Hồng Hà, General Director of Vietnam Airlines said at the annual General Meeting of Shareholders that the Vietnamese airline market would see many positive changes because the Government had reopened and resumed domestic flights and international flight routes. However, the international airline market would still face many difficulties because of complicated disease developments, a sharp decline in vaccine effectiveness and high input fuel prices.

Hà said that the tourists travelling were mainly Vietnamese. The number of foreign customers had not been able to recover as before the pandemic. Đặng Ngọc Hoa, Chairman of Vietnam Airlines quoted forecasts that the world aviation market will recover by the end of 2024.

SSI Research also assesses that the profit growth of enterprises in the airline industry this year is forecast to grow insignificantly because the resumption of international routes is estimated to be slow, as key markets such as China, South Korea and Japan have yet to fully reopen. Therefore, the profit of the whole industry is estimated to increase more strongly from 2023 onwards.

The Vietnam Airlines Corporation (ACV), the unit that directly manages 22 of 23 civil airports in Việt Nam, has had a bumper quarter. It recorded net revenue of VNĐ3.43 trillion in Q2, 2.5 times higher than the same period in 2021. In which, revenue from aviation services reached VNĐ3.27 trillion, up 123 per cent year-on-year. Financial revenue reached VNĐ1.91 trillion, twice as much as in the second quarter of 2021 thanks to an increase in exchange rate differences.

During Q2, this unit made a net profit of VNĐ1.47 trillion thanks to the difference in exchange rates. Financial expenses and general and administrative expenses both decreased while selling expenses increased. ACV collected VNĐ2.6 trillion in profit after tax, 7.6 times higher than the same period last year.

In the first six months, ACV's net revenue reached VNĐ5.56 trillion, up 61.5 per cent compared to the first half of 2021.

Airlines struggling because of rising fuel prices

As of June 30, five civil airlines in Việt Nam including Vietnam Airlines, Vietjet Air, Bamboo Airways, Pacific Airlines and Vietravel Airlines are operating nearly 60 domestic routes connecting Hà Nội, Đà Nẵng and HCM City with 19 local airports.

Airlines are promoting the exploitation of flight routes to tourist destinations such as Đà Nẵng, Quy Nhơn, Phú Quốc and Nha Trang. Typically, the frequency of operation to/from Phú Quốc currently reaches 100 domestic flights per day compared to 2019, when there were only 72 both international and domestic flights per day.

However, the high oil price is one of the big hurdles for Vietnamese airlines. As of June 30, Brent oil traded around $106 per barrel, up 37.6 per cent compared to the beginning of the year.

Vietnam Airlines (HVN) announced its second quarter business results with revenue of VNĐ18.3 trillion, 2.8 times higher than the same period last year. However, the cost of goods sold increased strongly to VNĐ18.7 trillion, 3.3 times higher, causing the company to have a gross loss of VNĐ377 billion.

Revenue from financial activities reached VNĐ149.1 billion, up 5.4 per cent compared to last year. Selling and administrative expenses increased by 111.8 per cent and 6 per cent, respectively. Besides, financial expenses were VNĐ1.15 trillion, 2.7 times higher than the same period last year. As a result, Vietnam Airlines suffered a loss after tax of VNĐ2.6 trillion, down from the loss of VNĐ4.53 trillion in the second quarter of 2021.

At this year's Annual General Meeting of Shareholders, Trần Thanh Hiền, Chief Accountant, explained that although this year the Government had completely opened up the flight routes, the price of jet fuel had increased, as had operating costs. VNS

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