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Airlines fight for the skies with low fares
With more low-cost carriers coming to Vietnam, even full-service airlines are cutting fares to survive.
Malaysia Airlines recently launched an Everyday Low Fares campaign, offering budget fares from Kuala Lumpur to Hanoi and Ho Chi Minh City.
The lowest fare is a mere US$9, even cheaper than the fares on budget carrier AirAsia.
But it remains full-service and passengers are allowed to carry up to 20 kilograms of luggage.
Terence Swampillai, the carrier’s director in Vietnam, denied the campaign is designed to compete with AirAsia, the largest no-frills airline in Southeast Asia.
Around 68 percent of the seats have been taken in the second quarter, down from 80 percent in the first, he said.
In April, AirAsia began operating daily flights between Kuala Lumpur and HCMC and four a week between Bangkok and HCMC.
It had successfully operated for several years on the Hanoi-Kuala Lumpur and Hanoi-Bangkok routes.
Like many other foreign operators, AirAsia considers HCMC a priority market in Vietnam.
Tassapon Bijleveld, Chief Executive Officer of AirAsia’s subsidiary Thai AirAsia, said the load factor has increased rapidly since it launched direct flights from HCMC to Bangkok and Kuala Lumpur.
Aircraft departing HCMC often fly 90 percent full, he said.
AirAsia doesn’t feel threatened by Malaysia Airlines’ move, Bijleveld said, noting that as a no-frills carrier AirAsia sells cheap tickets every week while Malaysia Airlines can only offer budget fares at certain times.
Malaysia Airlines is not the only full-service airline that has decided to slash fares.
Vietnam Airlines, the national flag carrier, has adjusted ticket prices since February 2007 to compete with domestic budget carrier Pacific Airlines, now known as Jetstar Pacific.
The growing competition and high oil prices led to a loss of VND83 billion ($5 million) in the first half for Vietnam Airlines.
It said revenues were VND12.1 trillion ($730 million), a 28 percent year-on-year rise, but expenses surged to VND12.183 trillion ($735 million).
Jetstar Pacific reported a 140 percent rise in load factor in the first half.
The company, formed by the merger of Pacific Airlines and Australian budget carrier Jetstar, also announced plans to begin new flights, both domestic and international.
Vo Huy Cuong, head of the Aviation Transport Department, said the domestic airline industry continued to grow during the six-month period in terms of both passenger numbers and cargo volume.
The number of passengers using airports in the country increased by 23 percent and about 214,000 tons of goods were handled, a 15 percent year-on-year rise, Cuong said.
But with jet fuel costs making up half their expenses, some airlines like Vietnam Airlines have been hit hard by the price surge.
According to the International Air Transport Association, the price of jet fuel in July was $166 a barrel, up 81 percent from July last year.
Some foreign airlines said, however, they remain optimistic about the Vietnamese market.
More have recently come to the country - including Indonesia’s largest private carrier Lion Air and the low-cost Cebu Pacific of the Philippines.
Bijleveld of Thai AirAsia said, despite fierce competition, airlines can make profits if they know how to cut personnel costs.
For instance, he said, his airline only has four employees responsible for marketing activities in HCMC.
Thanhnien
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