Airlines battle for market share

Domestic air carriers are working hard to retain market share in the face of higher expenses, a fixed ticket-price system, lower prices, and more competitors.
According to the Civil Aviation Administration of Viet Nam, the number of passengers last year rose 20 per cent compared to 2009 as a result of lower prices and more air routes.
Despite the higher income, airlines are still finding it difficult to compete.
The national carrier, Vietnam Airlines (VNA), for example, reached a turnover of VND36 trillion (US$1.8 billion), but profits were only VND350 billion ($17.5 million) last year.
"The exchange rate increased last year, which caused big losses for us, around VND1 trillion ($50 million), because 70 per cent of our expenditures were not paid in Vietnamese dong," said Pham Ngoc Minh, general director of VNA.
For Jetstar Pacific airlines, after the huge losses of the last few years, it has only seen a 3.4 growth in customers.
The newcomer Air Mekong (AMK) accepted losses in the beginning stages, and after three months, transported 120,000 passengers.
Air Mekong recently asked the Government for permission to sell its 30 per cent share of the airline to American SkyWest.
The Vietnamese air carrier law came into effect in 2007 and allowed individuals to set up their own airlines if they have legal capital of VND200 billion ($10 million) for one to 10 airplanes to fly domestically and VND500 billion ($25 million) for international flights.
As a result, the market became more attractive, but also more competitive because of the requirements needed, including huge amount of capital, and modern management and techniques.
Many air carriers, such as Indochina Airlines, VietJet, Air Mekong, Trai Thien, Bluesky and Vietstar, have registered to do business, but only Air Mekong is operating.
Indochina Airlines stopped flying after one year because of the high amount of debt from loans.
The Government has encouraged foreign airlines to enter the Vietnamese market, with 44 foreign air carriers now working in Viet Nam, instead of 18 in 2002.
Foreign market share has risen significantly. For international destinations under three hours, Viet Nam in the past held 40 per cent of the market, but now has only 15-20 per cent on some international routes.
Economic experts suggest that the Government abolish the fixed ticket-price system, allow airlines to adjust their ticket prices during different periods, and allow more investment for infrastructure.