Airlines catch glimpse of light at the end of tunnel

Vietjet’s forced focus on the domestic arena last year has in part paid off financially. Photo: Duc Thanh

In total, the Vietnamese aviation sector reported losses of VND18 trillion ($782.6 million) from their transportation operations last year, while the sector’s revenue declined VND100 trillion ($4.35 billion) in comparison to the previous year.

National flag carrier Vietnam Airlines suffers losses of over $480 million in 2020, lower than its estimated figure of $626.3 million last December. The airline’s accumulated revenue in 2020, thus, fell sharply by 59 per cent on-year to $1.76 billion. However, according to a recent Vietnam Airlines financial statement, the lower-than-expected loss only came after the airline completed procedures for depreciation adjustment and funds allocation for aircraft maintenance under the government’s support programme.

Meanwhile, budget carrier Vietjet has reportedly passed through the pandemic somewhat unscathed. While official results are yet to be released, CEO Nguyen Thi Phuong Thao shared that the figures were positive, with not one employee losing their job. Although the airline was grounded in the early part of last year, from June it had restarted its domestic network and added eight new routes to serve the domestic demand. For some markets, Thao said that traffic was actually around 30 per cent higher than it was in 2019, helping to put Vietjet in a strong position for 2021.

Bamboo Airways also seem to have made impressive results with pre-tax profit of $17.4 million. The profit is said to be coming from its signature 5-star flight-resort-golf packages, combined with the FLC Group ecosystem. According to Dang Tat Thang, standing vice president and CEO of Bamboo Airways, by the end of 2020 it boasted more than 30 aircraft and added a new Embraer 195 line, filling unexploited routes to destinations that lack small aircraft.

In addition, Bamboo Airways last week obtained slots to operate six flights a week from Heathrow, including three flights to Ho Chi Minh City and three to Hanoi. Last year, Bamboo Airways planned to fly directly to London and Frankfurt in the first quarter of 2021, but the move was inevitably delayed.

With the international market still mostly frozen, airline operations are based on domestic routes, along with a few repatriation flights and air freight. Last year the government applied various supporting policies for aviation businesses as a result, including a policy of 50 per cent discount on service fees for takeoff and flights to/from airlines. Thanks to this alone, Vietnam Airlines saved around $6.7 million.

The policy of reducing environmental protection tax on aviation fuel has also helped airlines reduce costs by as much as $7 million last year, expected to be about $18.7 million in 2021.

Last November, Vietnam Airlines obtained a credit package worth $174 million. Due to that, Vietjet also requested a credit package of between $175-215 million for the 2021-2023 period, with interest rates reduced by 4 per cent. Meanwhile, Bamboo Airways called for a refinanced zero interest long-term loan of $217 million and long-term loans worth the same amount from commercial banks with subsidised interest rates.

However, the support does not yet seem to be enough for the development of Vietnamese airlines.

According to the Vietnam Aviation Business Association (VABA), it is estimated that Vietnamese airlines are projected to suffer a total loss of up to VND15 trillion ($652.17 million) in 2021 because revenues continue to fall sharply compared to that of last year. The association said airlines are simply suffering from cash flow risk exhaustion.

A proposal from the VABA for credit assistance to aviation companies recently submitted to the Ministry of Planning and Investment suggests reducing the environmental tax on fuels to around VND1,000 (4 US cents) per litre and extending deadlines for paying various taxes.

Beyond proposals for financial support, the VABA also suggested to the government to create encouraging policies to promote quarantine tourism products at hotels and resorts as well as diversify staycation products to help both domestic and international tourists understand many more of the cultural traditions and identities of Vietnam during their temporary quarantine period.

At the same time, the association wants a step-by-step reopening of international routes, and accepting international travellers with vaccine passports into Vietnam.