Vietnam’s aviation industry reeling from multiple blows

      The economic downturn and H1N1 flu pandemic have made Vietnamese air carriers stagger. The national flag air carrier Vietnam Airlines has reported low profit for the second quarter. Indochina Airlines is still in debt and Vietjet Air remains uncertain when it will offer its first flight.
Losing money on international flights
Vietnam Airlines’ figures show that the operations of the air carrier were heavily affected in the first six months of 2009 by the global economic downturn and H1N1 pandemic, with the biggest influence seen in international flights.
The number of foreign passengers coming to Vietnam by air decreased by 12 percent in the period, enabling Vietnam Airlines to fulfill only 42 percent of its yearly plan. While the average seat occupancy rate of the airline was 72.5 percent, the rate for international flights was just 36.5 percent.
Meanwhile, the airline had to compete more fiercely with foreign airlines as they continuously launched promotion campaigns.
Therefore, even the 15 percent growth rate in the domestic market could not offset the losses brought on by international flights.
Vietnam Airlines’ profit was 28 billion dong in the first six months of the year, while in the first quarter of the year it was 24 billion.
The total number of passengers in the first half of 2009 of Vietnam Airlines increased by 0.6 percent only. Jetstar Pacific saw 28.7 percent growth in the number of passengers in the first quarter of 2009, but the growth rate was still lower than the 54.6 percent growth rate of 2008.
Indochina Airlines, meanwhile, is still struggling with a 50 billion dong debt for fuel, traffic control fees and airport service fees; Vietjet Air has not been self-confident enough to offer its first flight, though it was licenced one year ago.
Struggling to survive
Vietnam Airlines said that cutting expenses will be its priority for the rest of the year.
Its fuel saving programme, for example, has helped it save $6-7 million already this year. Moreover, the air carrier has been considering adjusting air routes to reduce flight costs.
Since the beginning of July, the air carrier has been providing direct flights in accordance with four new air routes and changed its flight mode with Tan Son Nhat Airport, which will enable it to save several hundred billion dong every year.
The Government has also put forward important measures to rescue domestic airlines. It has approved investment plans on upgrading 10 airports to make them meet international standards by 2020.
The Government has also approved a finance plan allowing Vietnam Airlines to purchase 32 Airbuses, 16 Boeings and 11 ATR 72s, ensuring foreign currencies for the airline to raise its fleet to over 100 aircrafts by 2014.
Dang Ngoc Minh, Deputy Director of the Tax Policy Department under the Ministry of Finance, said that Vietnam is applying a 0 percent tax rate on imported aircraft and aircraft parts. Machines and equipment serving the aviation industry also see preferential import tax rates in comparison with other sectors (buses for airports are now imposed a 5 percent tax, while normal buses 60 percent).