On the occasion of the 58th anniversary of studying in Australia, Assoc. Prof. Dr. Nguyen Thien Tong, former Head of the Aerospace Engineering Department, Ho Chi Minh City University of Technology, had the chance to meet with friends and former students who participated in the Colombo Plan program to reminisce about old memories and visit his son’s family earlier this year. Traveling to Australia on Vietnam Airlines, Mr. Tong shared that the airline provided good service, with the only downside being the confusing signage in the airport lounge.
Based on this trip and observations of the aviation industry at the beginning of the new year, this expert believes that the aviation sector, although recovering slowly, is showing promising growth as people are relieved from the psychological impact of the pandemic. As a result, trade and tourism activities are bouncing back, and there is an influx of overseas Vietnamese returning home during the recent Lunar New Year.
BOOMING INTERNATIONAL AVIATION MARKET
According to Assoc. Prof. Dr. Nguyen Thien Tong, instead of focusing on the huge Chinese market, Vietnamese airlines diversified and expanded their presence in other markets. In particular, Australia and India experienced the strongest growth compared to 2019 as airlines continuously opened new routes and increased frequencies compared to the pre-pandemic period.
For example, Vietnam Airlines increased frequencies on multiple routes to Australia and opened a new direct route from Ho Chi Minh City to Perth. Vietjet also opened new routes connecting Ho Chi Minh City with Perth and Adelaide, becoming the first airline to connect Vietnam with the five largest cities in Australia. As a result, the Australian market transported 913,000 passengers, a 40% increase compared to the same period.
In addition, Vietnamese airlines also expanded their operations in the Indian market, with an expected transportation of 920,000 passengers in 2023, nearly 15 times higher than in 2019.
The international aviation market saw explosive growth during the Lunar New Year holiday, as revealed by data from the Civil Aviation Authority of Vietnam. International passenger transport during this peak period reached approximately 748,600 passengers, a 54% increase compared to the same period in 2023.
However, domestic passenger transport experienced a 13.2% decrease, with over 762,400 passengers. Although airfares were high during the Lunar New Year, the increasing demand led airlines to add more flights and lease additional aircraft, crew, and cabin crew to reap additional profits, despite the higher costs involved.
Overall, the total passenger transport market by air from February 8-14, 2024 (equivalent to the period from the 29th day of the 12th lunar month to the 5th day of the Lunar New Year) reached over 1.5 million passengers, an 11% increase compared to the same period in 2023.
In February as a whole, international passenger traffic increased significantly by 59.1% to reach 3.65 million. Vietnamese airlines carried 5.1 million passengers, a 21.6% increase compared to the same period, including 1.6 million international passengers.
For 2024, the Civil Aviation Authority of Vietnam forecasts that the air transport market will reach 80.3 million passengers and 1.16 million tons of cargo, corresponding to a respective increase of 7.1% and 4.8% compared to 2023. Compared to the pre-Covid period (2019), these figures represent a 1.5% increase in passenger numbers and a 7.7% decrease in cargo volume.
In the coming year, the authority will continue to prioritize ensuring aviation security and safety and supporting airlines in resolving difficulties by restoring and expanding international operations. It will also push for progress in the construction and upgrade of airport infrastructure nationwide.
TURNAROUND IN PROFITS
In 2023, the aviation industry continued to recover as the pandemic subsided, and airlines reported profits from core business activities instead of relying heavily on financial investments or aircraft sales and leases. The international aviation market, in particular, led revenue and profit growth for airlines after a period of low demand. Figures from the Civil Aviation Authority of Vietnam show that international passenger transport in 2023 reached 32 million passengers, 1.7 times higher than in 2022 and 77% compared to 2019.
In terms of financial results, Vietnam Airlines – the national flag carrier – reported consolidated total revenue and other income for the entire year 2023 increased by 38%, equivalent to over VND 19,544 billion ($843 million), and consolidated total revenue increased by 30%, equivalent to VND 21.380 billion ($918 million) compared to 2022. For the year as a whole, the airline’s net revenue stood at nearly VND 91.460 billion ($3.9 billion), increasing by 30% compared to the same period due to market recovery and a 49.1% increase in international revenue compared to the same period last year.
Although the business performance declined in the final quarter of the year, with a gross loss of VND 189 billion ($8.1 million) compared to three consecutive quarters of gross profit, Vietnam Airlines still achieved consolidated gross profit of VND 3.939 billion ($169 million), a complete turnaround from a gross loss of nearly VND 2.900 billion ($125 million) in the same period. This is a positive result in the post-Covid-19 recovery period and in the face of ongoing challenges and difficulties in the business environment.
Overall, Vietnam Airlines recorded a post-tax loss of VND 4.798 billion ($206 million) for the year, a 45% decrease, equivalent to a loss reduction of VND 4.054 billion ($174 million) compared to the same period. The consolidated loss was VND 5.517 billion ($237 million), a 51% decrease, equivalent to a loss reduction of VND 5.706 billion ($245 million).
Explaining the fluctuations in after-tax profit, Vietnam Airlines attributed the decrease in losses for the whole year 2023 to a reduction of VND 5.700 billion ($245 million) compared to 2022. The after-tax profit of the consolidated financial report for the fourth quarter of 2023 decreased compared to the fourth quarter of 2022, primarily due to a reduction in after-tax profit for Pacific Airlines and the parent company (Vietnam Airlines). Additionally, companies such as Nội Bài Catering Services Joint Stock Company (NCS), Vietnam Airlines Catering Services Co., Ltd. (VACS), and others were profitable compared to the fourth quarter of 2022.
In 2023, Vietnam Airlines took the initiative to implement a series of short-term and long-term solutions to minimize Covid-19-related losses, improve business operations, and supplement capital and cash flow. Thanks to better business performance in 2023, Vietnam Airlines’ overall financial picture is gradually brightening.
Vietjet Air Corporation reported revenue of VND 53.645 billion ($2.3 billion) (standalone) and VND 62.534 billion ($2.7 billion) (consolidated), a 62% and 56% increase, respectively, compared to 2022. Net profit after tax reached VND 697 billion ($30 million) and VND 344 billion ($14.8 million) for the standalone and consolidated figures. Therefore, at the end of 2023, Vietjet exceeded 24% of its consolidated revenue target for the year (VND 50.178 billion) and achieved after-tax profit equal to 34% of the set goal (VND 1.000 billion).
Vietjet also recorded gross profit from the sale of goods and services of the parent company at VND 2.558 billion ($110 million); and consolidated gross profit at VND 2.917 billion ($125 million), a complete turnaround from the massive loss in the same period.
Vietjet marked a successful year due to its expansion in the international market, which contributed to the recovery and development of tourism, investment, domestic and regional trade, and diversification of products and supporting services. Vietjet focused on developing its international route network in 2023, opening 16 new international routes, bringing the total number of routes to 125, including 80 international routes and 45 domestic routes. In 2023, Vietjet transported 25.3 million passengers, a 23% increase compared to 2022, including over 7.6 million international passengers, a 183% increase.
EXPECTED GOOD NEWS FOR 2024
In 2024, the Vietnamese aviation market is expected to enter a new phase of development as major airlines return to profitability after years of struggling due to the pandemic. With the full recovery of international passenger traffic, this market segment is bringing significant profits to many airlines, making it a lucrative opportunity.
The content of the article was published in Vietnam Economic Magazine issue 09-2024 released on February 26, 2024.
Source: Tạp chí Kinh tế Việt Nam
