New flight routes stress airport infrastructure

Vietnam Airlines and Vietjet are both opening new flights to Japan

A slew of new flight routes

According to plan, from October 28 Vietnam Airlines Corporation (Vietnam Airlines) will officially open a new route from Danang to Osaka (Japan) with seven flights per week by four-star international-standard Airbus A321 planes. These new routes will depart from Danang at 00h20 and from Osaka at 09h30 with a flight time of about four and a half hours.

This Vietnam Airlines’ eleventh route to Japan, following the routes connecting Hanoi, Ho Chi Minh City, and Danang with Tokyo, Osaka, Nagoya, and Fukuoka. This shows the airline’s determination to extend its passenger transport market share in Japan.

Vietnam Airlines is currently the largest on the Vietnam-Japan direct route, with about 70 flights per week. Since the first nonstop flight in 1994, 11.3 million passengers flew Vietnam Airlines between the two countries, accounting for 65 per cent of the market. Vietnam Airlines’ market share on the Vietnam-Japan route may exceed 70 per cent if the eight round-trip flights of Jetstar Pacific connecting Hanoi and Danang with Osaka are included.

The market share of Vietnam Airlines may change a little if Vietjet properly exploits its three routes to Japan (Hanoi-Osaka, Ho Chi Minh City-Osaka, Hanoi-Tokyo). These three international routes of Vietjet expect to open in the fourth quarter of 2018 and early 2019, on November 11, December 14, 2018, and January 11, 2019, respectively. The latest date will coincide with the 45th anniversary of the establishment of diplomatic relations between Vietnam and Japan.

Previously, on September 21 at Danang International Airport, Vietjet welcomed the first passengers on the Nha Trang-Danang flight which is a daily round-trip flight that takes about an hour per journey.

According to the Civil Aviation Authority of Vietnam (CAAV), at the end of July 2018, there were 63 foreign aviation firms from 25 countries and territories which had international routes to Vietnam. Foreign and Vietnamese (Vietnam Airlines, Jetstar Pacific, Vietjet Air) aviation firms now run 105 international routes from/to Hanoi, Ho Chi Minh City, Danang, Nha Trang, Phu Quoc, and Haiphong. However, the number of international routes connecting to Vietnam will increase strongly with the four new routes to Japan in the third quarter of 2018.

New motivations

There are many reasons for aviation firms to open more flights to Northeast Asia, even in the low season. Besides, the two new destinations of Vietnam Airlines and Vietjet are Osaka and Tokyo, which are predicted to become popular among Vietnamese visitors especially in autumn. Also, Japan has always been one of the most profitable markets to Vietnamese airlines.

According to Nguyen Thi Phuong Thao, general director of Vietjet, profits from international routes, especially in Northeast Asian destinations like Taiwan and Korea, are 20 per cent higher than domestic routes.

Vietjet’s profit comes not only from market expansion but also from services, such as duty-free sales. In addition, fuel also costs 30 per cent less overseas as it is subject to lower taxes and fees, such as import tax and environmental charge, while this is the largest cost in the revenue structure of airlines.

During the first six months of 2018, the total passenger volume reached 16.8 million, 7.8 per cent more than during same period last year and 3.6 per cent less than expected. Especially on the Hanoi-Ho Chi Minh City, Hanoi-Danang, and Ho Chi Minh City-Danang flights, passenger numbers increased by 4, 9.1, and 3.4 per cent against the corresponding period last year.

According to Vietnam Airlines, passengers volume on international routes in the first half of 2018 reached 14.8 million, increasing by 23 per cent on-year and 1.6 per cent more than expected.

Upgrade to develop

According to the Ministry of Transportation, due to overexploitation, runway No.07L/25R of Tan Son Nhat Airport has been cracked at several places and the asphalt road surface was deformed. Similarly, runway No.1B of Noi Bai Airport also has several cracked and subsided concrete slabs. Previously, runway No.07L/25R of Tan Son Nhat Airport was closed to repairs twice in July 2015 and July 2016.

Runway conditions must be improved if Vietnamese aviation firms want to open more international and domestic routes. The Ministry of Transportation is seeking the prime minister's approval to spend VND4.5 trillion ($119.11 million) to upgrade and fix the above problems.

Airlines are trying to increase revenue by opening new international routes, but if the facilities are not upgraded properly, they may suffer losses instead.