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Private airlines struggling with inflation
Though the CEOs of the two first private airlines in Vietnam declined to reveal the difficulties they are facing, they acknowledged that they have joined the market during a difficult time.
It is now considered the most difficult time the world’s aviation industry has faced in its history. All the airlines in the world are struggling to survive this difficult period while maintaining growth, and Vietnam’s airlines are no different.
Two private airlines have joined the market in these difficult conditions.
Living alongside with inflation
Managing Director of VietJet Air, Brian Presbury, said that the first commercial flight of the new air carrier will take off in December 2008 as per it’s commitments to the airline management authorities.
VietJet Air is the first private airline to be set up in Vietnam and made it’s debut in December 2007.
The air carrier has signed a co-operation agreement with GECAS to charter two Boeing 737-700 aircraft. The first of the two will be delivered in November 2008 so that the airline can launch the new air routes Hanoi – HCM City and Hanoi – Da Nang a few days later.
In its long term development strategy, VietJet Air fleet will eventually include 20 aircraft and provide international flights to Hong Kong, China’s southern provinces, Bangkok, South Korea and Japan. VietJet Air is currently trying to recruit 400 staff, and train the first group of pilots. Aiming to become a new-generation air carrier, VietJet Air will operate as a low cost airline which always strives to provide competitively priced and high quality services.
The second private airline in Vietnam is Air Speed Up, which was licensed several months ago and plans to join the market officially in October 2008. The airline will only provide domestic flights on air routes with a high demand such as Hanoi – HCM City and flights to Da Nang.
Air Speed Up is now in negotiations to charter three Boeings 737-800 aircraft.
Though the CEOs of the two first private airlines in Vietnam declined to reveal the difficulties they are facing, they acknowledged that they have joined the market during a difficult time.
It is clear that the airlines will have to incur losses for a long time while facing stiff competition from their more experienced competitors, Vietnam Airlines and Jetstar Pacific, who are making great efforts to restructure themselves and improve their competitiveness.
Tightening airlines’ belts
Cutting down expenses and curtailing ineffective air routes are the things Vietnam Airlines and Jetstar Pacific are trying to do in their struggle with skyrocketing fuel prices.
Jetstar Pacific has twice announced a postponement in plans to open new flights on the HCM City – Da Lat – Buon Me Thuot and Hanoi – Hue air routes. Only one flight from Hanoi to Hue has been scheduled so far, after the air route was launched on June 1. The Hanoi – Hue air route has been postponed for an indefinite time, while the airline is now providing four HCM City – Vinh City flights a week instead of the previously announced seven.
Meanwhile, the airlines have been focusing on developing routes which have a high demand. Jetstar Pacific has opened two new routes from Hanoi to Da Nang and Nha Trang, while Vietnam Airlines plans to increase the number of flights to the seaside city of Nha Trang and Phu Quoc Island. The air carrier is also trying to raise its seat capacity to 80%.
All these measures are expected to help the airlines save VND 1.2-1.4bil a year. However, that sum of money will be insufficient to cover the increased expenditure for fuel, estimated to reach VND 3tril.
The recent decisions by the Ministry of Finance to reduce the air petrol import tax from 15% to 5%, and then finally to 0%, did not greatly help domestic airlines.
Expenses for fuel now account for 65% of total flight expenses for a budget airline like Jetstar Pacific, and 50% for a traditional airline like Vietnam Airlines. In order to ease the difficulties, air carriers are now seeking for permission to collect surcharges from passengers. In fact, the measure has been widely used by international airlines, but it has not been applied for domestic flights in Vietnam yet.
VNN
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