How Vietnam’s aviation arena is responding to restrictions

September 16, 2020 | 09:00
Amid the continuing obstacle that is the global health crisis, the movement of people and tourists has come to a near standstill, forcing airlines to open up new business models in order to maintain operations.
how vietnams aviation arena is responding to restrictions
There are inklings that air routes could slowly begin expanding for travellers in the next month or two

In early September, Vietjet officially kicked off self-handling ground operations at Noi Bai International Airport in Hanoi, instead of relying on third-party service providers like before. As a result, Vietjet will become the first ever private carrier in Vietnam to handle its ground services, paving the way for the airline’s further service expansion in the future.

“The launch of Vietjet’s ground services today is one of the milestones of the company’s strategic development to optimise cost-reducing efforts while enhancing service quality and facilitating more sources of revenue,” said Vietjet vice president Nguyen Thanh Son.

Vietjet is a typical case in the aviation industry in Southeast Asia for its flexible approach to find new business solutions and respond to the changing and challenging business environment. While airlines are facing a serious crisis, including the risk of bankruptcy, Vietnam’s low-cost carrier demonstrated impressive results with consolidated profit after tax of VND47 billion ($2 million) in the first half of the year.

This has become an unexpected highlight for the Vietnamese aviation industry, especially while other airlines are struggling to implement a series of solutions to increase revenue and optimise operating costs to minimise losses.

Fierce competition

Over the past few days, unprecedented promotions have been launched as Vietnamese airlines raced to reduce prices to attract customers. The playground for airlines has narrowed due to COVID-19, with the international tourist market at a halt since the end of March. With the main source of profits coming from that international market, airlines were left to exploit the domestic one instead. However, this market has also been experiencing strong fluctuations as people change consumption habits and reduce the desire for air travel and tourism. Therefore, airlines have continuously launched several attractive promotions to both satisfy customers and save themselves during the pandemic.

Among some of the outstanding deals, Vietnam Airlines offers a 50 per cent discount on all domestic flights each Thursday; Jetstar flights are exempting taxes; and Vietjet offers tickets from only VND1,600 (7 US cents) on specific routes. Airlines also continue to launch other attractive promotions, such as the Welcome Fall 2020 programme with tickets from VND69,000 ($3) by Vietnam Airlines.

In addition to ticket discounts, airlines also offer several product packages at reasonable prices and attractive benefits such as resort experiences, where Vietnam Airlines offers deals including hotel rooms at one of Vinpearl properties across the country, and similar combos between Bamboo Airways and FLC’s luxury hotels and resorts.

Moreover, Vietjet and Vietnam Airlines offer flight card packages, including unlimited flights and flexible changes of departure dates, leveraging both airlines ability to recover revenue in the domestic market.

In addition, local airlines have been opening new routes as a solution to assert their position amid the pandemic.

Vietnam Airlines launched 13 new domestic routes in May and June, while Vietjet opened eight new routes in mid-June, increasing its total domestic routes to 53. Thai Vietjet’s domestic flight network is set to increase to 12 routes after adding five new ones in Thailand. Vietjet confirmed that it will continue to increase the flight frequencies and expand its network in the near future.

Meanwhile, Bamboo Airways has also announced the opening of new niche routes from Thanh Hoa to Phu Quoc and Quy Nhon, and from Hanoi to Dien Bien and Con Dao in the next few months.

Focusing on the low-cost segment, Vietnam Airlines and Qantas Group agreed to reconstruct Jetstar Pacific synchronously by renaming the carrier Pacific Airlines. Vietnam Airlines will hold 98 per cent of Pacific Airlines and replace the current booking system by Qantas with its own to synchronise its flight management data and booking processes, together with other functions, for customers.

New direction

At the time when mass passenger transportation remains unfeasible, cargo transport services in passenger plane cabins are one of the unprecedented solutions applied by many airlines.

Large airlines such as Virgin Atlantic, American Airlines, and Lufthansa have had to temporarily apply this to maintain operations, mainly transporting masks and medical equipment.

Dominic Kennedy, in charge of air freight at Virgin Atlantic, said cargo transport is one solution to help the company withstand the difficult situation and wait for a return to normality.

In Vietnam, Vietjet also followed this approach and transformed their cabins for cargo transportation – it also became the first airline in Vietnam to gain the government’s approval to deploy cargo operations in the passenger cabin.

According to Son, Vietjet has proactively introduced many solutions to seize opportunities during the pandemic such as developing cargo services from April and enhancing aircraft leasing services.

To maximise operating costs, Vietjet also bought and stockpiled gasoline and fuel when it was cheap in May, helping to reduce costs by 25 per cent compared.

Vietnam Airlines also gained considerable revenue from leasing nearly 800 flights carrying nearly 11,700 tonnes of cargo from mid-March to the middle of May.

In addition, another effective solution that is being applied by all three major airlines is to operate international commercial flights to bring citizens home and welcome foreign experts to Vietnam.

Vietnam Airlines is the most successful airline in applying this model. When some flights to China from the national flag carrier resumed in July, a representative of this airline said that revenues of more than half a million US dollars from each flight have brought Vietnam Airlines some income during this difficult time.

These humanitarian flights also enhance the image and position of airlines, creating good impressions and improving brand communication towards customers.

After a new wave of coronavirus affecting mainly the central region in July and August, air transport has since showed signs of revival, with plans to slowly reconnect Danang. Despite the difficult times, the new Vietravel Airlines also announced that it is well prepared for its first take-off at the end of 2020.

Although the domestic market is still the main market for airlines this year, international commercial routes from Vietnam to China, South Korea, Japan, Taiwan, Cambodia, and Laos are hoped to soon be restarted this month.

According to the International Air Transport Association, Vietnam will be the fifth fastest-growing aviation market in the world and reach 150 million passengers by 2035. Although Vietnamese airlines are suffering heavy losses from the pandemic, they still have many opportunities to recover thanks to their flexible business solutions and the ability to adapt to the difficult situation.

By Hoang Oanh

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