Aviation industry forecast to face a hard year in 2021

2021 will still be a difficult year for the industry as it has no room for further recovery until international flights are reopened. - VNA/VNS Photo

The recent recovery was thanks to a complete restoration of domestic routes and the continued good performance of freight transport.

As of November, the total number of flights decreased by 23 per cent compared to the same period last year but strongly recovered from a decrease of 92 per cent in April.

The most effective route was HCM City - Ha Noi with 540 flights per week, reaching an occupancy rate of about 90 per cent.

However, commenting on the prospects of the aviation industry, Mirae Asset Securities Vietnam Co (MASVN) believes 2021 will still be a difficult year for the industry as it has no room for further recovery until international flights are reopened.

MASVN explained the current low fares are helping push up the demand for air travel on domestic routes. However, airlines can’t further cut the fares as they are too low. If airlines continue to reduce fares, it will be difficult to make profits.

"In the context of a fiercely competitive domestic market, we believe that the business situation of Vietnamese airlines will hardly improve further until the international routes are reopened," MASVN experts told vietnamfinance.vn.

With only domestic routes operating, the competition in the aviation industry next year will be fiercer. All aircraft are now converging on domestic routes to improve cash flow. Meanwhile, Vietjet Air has received 11 new aircraft, bringing the total number of aircraft in operation to 88. Bamboo Airways reduced two A320s but received four small aircraft E195, bringing its fleet to 26.

In addition, the aviation industry also has to compete against other transportation means like passenger cars and trains which have also applied fare discounts from 15 per cent to 50 per cent.

MASVN experts estimated it would take about four months to vaccinate 30 per cent of the US population and it was the minimum rate required to fight the COVID-19 pandemic. For other countries less developed than the US, the time to hit 30 per cent will be longer.

"International flights are likely to reopen as soon as the pandemic is repelled and the transport of international passengers will begin to recover gradually from that time. However, we expect the recovery rate will be slow, caused by isolation rules and restricted tourism demands in the wake of difficulties due to the pandemic,” the experts said.