Hanoi (VNA) – Vietnamese airlines have enjoyed better businessresults on the back of the tourism sector’s strong recovery. However, high oilprices and fierce competition from foreign competitors are among the grave concernsfor domestic carriers.

Revenue jumps, loss narrows

According to the General Statistics Office of Vietnam and the VietnamNational Authority of Tourism, Vietnam welcomed 8.9 million foreign arrivalsduring January – September, up 4.75 folds from the same time last year. Of thetotal, more than 6.1 million came to the country by air, increasing 3.7 foldsyear-on-year.

With the tourism sector bouncing back, domestic airlines have enjoyed robust businessresults.

The consolidated financial report from the Vietnam AirlinesJoint Stock Company (Vietnam Airlines) showed that the airline’s turnover inQuarter 3 rose 11.7% year-on-year to more than 23.75 trillion VND (981.6million USD), marking an eight-quarter streak of recovery.

During January-September, the company gained nearly 68.1 trillion VND in revenue, rising32.5% year-on-year. Meanwhile, it ran at a loss of more than 3.5 trillion VND, whichwas half of the figure recorded in the same time last year.

The Vietnam Airlines Group, which comprises national flag carrier VietnamAirlines, Pacific Airlines, and Vasco, operated over 114,000 flights, andtransported more than 18 million passengers during the period, according to theCivil Aviation Authority of Vietnam (CAAV).

Although Vietjet Air reported a surge of 25% in its revenue inQuarter 3, it is taking on formidable challenges.

Meanwhile, Bamboo Airways continued to adjust its flights for the year-endperiod with the suspension of various international flights from Hanoi and HoChi Minh City to overcome the rough times.

Airlinesneed support to improve competitive edge

Despite strong recovery, domestic airlines hasyet to reel in profits as airfares could not outpace expenditures.

the Vietnam Airlines Group’s domestic tickets in June fell 6.6% as compared to thesame month of 2019 – before the COVID-19 pandemic broke out.

The ceiling for airfares has been kept unchanged since 2015 while input costs suchas fuels and exchange rates have fluctuated, leaving a negative impact onairline business results, Vietnam Airlines said.

Vietnam Airlines spending on fuels last year surged 30.5% from 2015 – the timewhen the ceiling airfares were applied since average fuel prices rose 85% to124.46 USD per barrel in 2022 from 67.37 USD in 2015.

“Airline carriers incur 70% of costs in foreign currencies. Ticketrevenue is in VND, JPY and KRW, which are all falling against USD. Therefore,currency fluctuation risk has affected their business performance. The USD/VNDrate rose 6.6% from 21,900 VND in 2015 to 23,350 VND 2022, causing VietnamAirlines spending to increase 4.35%”, a representative from the national flagcarrier said.

According to insiders, the aviation sector needs support from the Government, relevant ministries and sectors, as well as the supply chain of both tourismand aviation sectors so as to carve out better performance.

In the long term, experts said it is necessary tolift the airfare cap, which have been placed on domestic routes, to helpairlines improve revenue and profits. However, the removal requires theamendment of the law on civil aviation and the law on prices that could take along time. Bottlenecks should be removed soon so that airlines couldsurvive until the end of 2024 when the market is on full recovery.

Vietnam Airlines proposed extending airfare caps in short term, creatingfavourable conditions for airlines to improve capacity and competitive edge.

It suggested imposing floor prices for domestic tickets based on theoperation model of each airline to create a sustainable competitive environmentfor airlines, and ensure rights and benefits for passengers./.