According to financial reports for Q1 2024, numerous domestic airlines have recorded revenue and profit growth in the double digits compared to the same quarter last year.
Airlines Report Significant Profits
Over the past three months, both revenue and profit of Vietnam Airlines have reached record levels amid market recovery. Specifically, net revenue reached nearly 28,000 billion VND, a 19% increase year-over-year. This is also the highest quarterly revenue ever since Vietnam Airlines transformed its operational model into a joint-stock company in 2015.
High revenue coupled with profitable subsidiaries also contributed to the airline’s growth. Vietnam Airlines has experienced some debt relief from Pacific Airlines due to the latter’s debt cancellation agreement upon aircraft repayment.
Thanks to this record revenue, the national flag carrier has broken its 16-quarter losing streak. By the end of Q1, the airline’s consolidated profit after tax reached 4,441 billion VND, with its parent company alone recording 1,500 billion VND in profit.
Not only Vietnam Airlines, another industry giant, Vietjet, has also improved its revenue in Q1 this year.
The airline’s consolidated revenue exceeded 17,790 billion VND, representing a 38% increase year-over-year. As a result, Vietjet’s profit after tax tripled compared to Q1 last year, reaching nearly 540 billion VND. This is also the highest profit the company has achieved since early 2020.
Another airline that has recorded positive business results for the first time is Pacific Airlines. This is the first quarter since the Covid-19 pandemic that Vietnam Airlines’ subsidiary turned a profit.
Similarly, the new player in the aviation industry, Vietravel Airlines, has also reported a significant increase in revenue during the first quarter of the year. Since its inception in 2021, the company has recorded its first net profit of approximately 10 billion VND in three consecutive months.
Reasons Behind the Soaring Profits
Domestic airlines’ revenue surged in the first months of the year due to the Tet holiday peak season, resulting in skyrocketing airfares on some high-demand routes. The increase in domestic airfare caps by 3.75%-6.67% from March 1, coupled with the shortage of aircraft due to engine maintenance, led to high ticket prices and scarcity. Notably, the high fares persisted not only during the Tet holiday season but also throughout the following month.
On the other hand, low-cost airfares of 0 VND, 9,000 VND, 14,000 VND, and 99,000 VND, which were previously employed to stimulate tourism, have almost disappeared since the beginning of the year as airfare caps were implemented. Additionally, tourism is gradually recovering, and airlines are seeking growth to offset revenue losses during the pandemic.
Another factor contributing to the airlines’ improved revenue is the recovery of the international market. After three years of being impacted by the pandemic, airlines are adjusting their resources to balance operations between domestic and international routes. Since the last quarter of 2023, several airlines have reduced frequencies or discontinued low-traffic domestic routes to focus on international flights.
In particular, during the first quarter, Vietnam Airlines’ international air transport revenue exceeded 13,800 billion VND, a 30.4% increase compared to the same period in 2023. The international segment’s contribution to the airline’s air transport revenue has increased threefold compared to its lowest point in 2021. The proportion of international flights and revenue has also approached pre-pandemic levels.
High demand and limited supply have given passengers fewer options but, conversely, have allowed airlines to optimize their profits. Recently, Bamboo Airways has had to cut several routes and aircraft, while Pacific Airlines has also returned aircraft. This has resulted in the national flag carrier capturing almost the entire domestic market share in the high-end segment, with low-cost fares dominated by Vietjet.
According to the International Air Transport Association (IATA) forecast, the global aviation market will fully recover by the end of 2024. Notably, the Asia-Pacific market, which has been the slowest to recover, is expected to break even and achieve a profit of approximately 1.1 billion USD in 2024.
Yuanta’s aviation industry analysis report suggests that airlines are facing an opportunity to recover and increase profits as the domestic market has fully recovered and grown compared to the pre-Covid-19 period, while the international market is on the path to recovery.
“The Vietnamese aviation market is projected to follow the trend of the Asia-Pacific region and will fully recover by the end of 2024,” the analysis report states.
