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Aviation industry moves to weather the storm
The global economic crisis is taking a heavy toll on the aviation industry which is likely to see a sharp decline in transport services. Experts say it is time for the industry to restructure itself and make up the leeway.
Vietnam has five airlines namely Vietnam Airlines, Jetstar Pacific Airlines, VietJet Air, Indochina Airlines and Mekong Airlines, along with 43 foreign airlines which are conducting flights to and from Vietnam. All these businesses are now facing a hard time.
Falling into a decline
The International Air Transport Association (IATA) has warned that the global aviation industry will face the sharpest decline in revenues in 50 years as a result of the global financial crisis. Asia-Pacific airlines that transport nearly one third of all passengers and 45 percent of cargo in the world, are expected to face a loss of US$1 billion in 2009, double last year’s figure. According to IATA, global air transport will fall by around 3 percent – the second largest for the aviation industry since the September 11 terrorist attack on the US.
In Vietnam, the number of passengers and the amount of transported cargo dropped by 11.1 percent and 13 percent respectively in the first four months of 2009.
Do Duc Tu, an official from the Ministry of Planning and Investment (MPI), says the National Aviation Corporation (Vietnam Airlines) has suffered most with the number of passengers falling by 3.3 percent in the first quarter. The national flag carrier is forecast to grow by just 4.9 percent this year as compared to 15.8 percent last year.
Jetstar Pacific Airlines grew at a rate of 28.7 percent in the first quarter of 2009, half its operation record in 2008. Meanwhile, Indochina Airlines – a private business that has operated for just six months – had to cut half of its flights on the HCM City-Hanoi route.
VietJet Air – the first private airline in Vietnam licensed two years ago – has not flown any flights and is at risk of having its license revoked.
Poor performance
It is true that Vietnamese airlines are not financially strong enough to cushion themselves against the impact of the global economic recession.
Lai Xuan Thanh, deputy head of the Civil Aviation Administration of Vietnam (CAAV), explains that the heavy dependence of the domestic aviation industry on foreign factors, especially personnel, has affected the cost of transport services.
Most pilots flying for Vietnamese carriers are from other countries: 30 percent for Vietnam Airlines, 90 percent for Jetstar and 100 percent for Indochina. Vietnam does not have any civil pilot training school, and has to send all Vietnamese pilots abroad for training. Each trainee costs the industry US$130,000.
Adding to this are high costs of fuel, materials and accessories, as well as aircraft maintenance services to be provided by foreign companies (more than 80 percent).
Vietnam has great potential for developing its aviation industry, considering its large population, a long country and a network of air terminals. However, only north-south flights can bring in little profit.
On international routes, Vietnam is the 6th largest provider of aviation transport services in Southeast Asia after Thailand, Malaysia, Singapore, Indonesia and the Philippines.
How to ride out the storm?
Without comprehensive solutions, the domestic aviation industry will find it difficult to meet its targets and develop on a par with regional countries.
By 2015, the industry plans to have 149 aircraft, enabling it to transport 35 million passengers, including 19.5 million foreigners. Vietnamese airlines, with a seat occupancy rate of 68 percent, will transport 22.4 million, and foreign airlines the remainder. However, this is not an easy task for domestic airlines.
To revamp the industry, Mr Thanh says it is necessary to develop a detailed plan for the aviation industry to weather the storm. The industry has no choice but to break up monopolies, control prices and build pilot training schools and aircraft maintenance centres.
According to expert Do Duc Tu from MPI, Vietnamese airlines should fully exploit the domestic market to recoup losses due to a fall in the number of foreign passengers, while lowering airfares to encourage people to travel by air. They should cooperate closely with each other to ride out the financial turmoil and with the tourism industry to attract domestic and foreign visitors to festivals across the country.
vov
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