The aviation industry recovers in the second quarter as new routes open
Published by: SOMA Team - - August 23, 2022

According to the Civil Aviation Administration of Vietnam, the total number of passengers in the industry reached 23.3 million in the first six months of this year, gaining 74.2 percent from the same period in 2021 and equivalent to 60 percent from the same period in 2019. The domestic market recorded 20.8 million passengers, a 58.4 percent rise over the first six months of 2021 and a 12 percent gain over the same period in 2019.

The total cargo transported in six months was estimated at 651,000 tons, a 6.8 percent increase over the same period in 2021 and a 7 percent increase over the same period in 2019, with the domestic market accounting for 146,900 tons, a 3.6 percent increase over the first six months of 2021 and a 29 percent decrease over the same period in 2019.

According to the Vietnam Civil Aviation Administration, the domestic market began to recover in April, increased again in May, and substantially grew in June. The domestic market welcomed 5 million travelers in June alone, a 20.9 percent increase over May and a 38.8 percent increase over June 2019 – the peak summer month before the Covid-19 pandemic. Seat occupancy on domestic routes was strong in June, ranging from 85 to 87 percent depending on the carrier.

At the Annual General Meeting of Shareholders, Le Hong Ha, General Director of Vietnam Airlines, stated that the Vietnamese airline market would see many promising developments because the government had reopened and resumed local and international flight routes. However, the international aircraft sector would still confront numerous challenges due to intricate disease developments, a dramatic drop in vaccination effectiveness, and high input fuel prices.

According to Ha, the majority of the visitors were Vietnamese. The number of international clients has not recovered to pre-pandemic levels. According to Dang Ngoc Hoa, Chairman of Vietnam Airlines, the global aviation sector will recover by the end of 2024.

According to SSI Research, profit growth in the airline industry is expected to be modest this year since the resumption of international flights is expected to be delayed, as key markets such as China, South Korea, and Japan have yet to completely reopen. As a result, the entire industry’s profit is expected to rise significantly beginning in 2023.

The Vietnam Airlines Corporation (ACV) managed 22 of Vietnam’s 23 public airports and had a solid first quarter. Its net revenue in Q2 was VND3.43 trillion, which was 2.5 times greater than the same period in 2021. Revenue from aviation services increased by 123 percent yearly to VND3.27 trillion. Due to increased exchange rate differences, financial revenue reached VND1.91 trillion, more than double that of the second quarter of 2021.

Because of the difference in exchange rates, this unit achieved a net profit of VND1.47 trillion in Q2. Financial, general, and administrative expenses also fell while selling expenses rose. ACV earned VND2.6 trillion in profit after tax, which is 7.6 times more than last year.

ACV’s net revenue in the first six months was VND5.56 trillion, a 61.5 percent increase over the first half of 2021.

Fuel price increases are causing problems for airlines.

Vietnam Airlines, Vietjet Air, Bamboo Airways, Pacific Airlines, and Vietravel Airlines operate over 60 domestic routes connecting Hanoi, Da Nang, and Ho Chi Minh City with 19 local airports as of June 30.

Airlines encourage flight routes to tourist areas, including Da Nang, Quy Nhon, Phu Quoc, and Nha Trang. Typically, the frequency of operation to/from Phu Quoc now exceeds 100 domestic flights per day, up from 72 international and domestic flights per day in 2019.

However, one of the significant challenges for Vietnamese airlines is the high oil price. Brent oil was trading at about US$106 per barrel as of June 30, up 37.6 percent from the start of the year.

Vietnam Airlines (HVN) reported second-quarter revenue of VND18.3 trillion, 2.8 times greater than last year. However, the cost of goods supplied climbed significantly to VND18.7 trillion, 3.3 times higher, resulting in a VND377 billion gross loss for the company.

Financial activity revenue totaled VND149.1 billion, up 5.4 percent from the previous year. Selling and administrative costs climbed by 111.8% and 6%, respectively. Furthermore, financial expenses totaled VND1.15 trillion, which was 2.7 times greater than last year’s period. As a result, Vietnam Airlines lost VND2.6 trillion after tax, down from VND4.53 trillion in the second quarter of 2021.

Tran Thanh Hien, Chief Accountant, noted at this year’s Annual General Meeting of Shareholders that, while the Government had opened up the flight routes this year, the price of jet fuel had grown, as had operating costs.


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