Aviation sector up bet88 con down

Domestic travelers taking to the skies in the first half of 2024 may have been surprised to see foreign flight attendants welcoming them as they boarded. Rather than investing in new aircraft, many local airlines have opted to wet-lease (renting the aircraft along with the pilots bet88 con crew) from other airlines, including international carriers, to maintain flight frequency bet88 con meet customer demand.

A report from the Civil Aviation Authority of Vietnam (CAAV) shows that the market continues to grow compared to the same period last year bet88 con is approaching pre-pandemic 2019 levels. Total passenger numbers reached nearly 37.5 million, an increase of over 3 per cent year-on-year bet88 con representing 97 per cent of 2019 levels. International passengers stood at 20.3 million, up 38 per cent bet88 con nudging ever closer to 2019 levels. Domestic passengers, however, fell by 18 per cent year-on-year bet88 con 7 per cent compared to 2019, totaling just over 17.2 million.

Market pressures

Vietnamese airlines ferried nearly 9 million international passengers in the first half, a 28 per cent increase against the same period of 2023 bet88 con capturing 44 per cent of that particular market. Vietnam Airlines bet88 con Vietjet Air held market shares of 17.8 per cent bet88 con 24.5 per cent, respectively. The top 10 international markets with the highest number of passengers coming to Vietnam in the first half of 2024 were, in order, South Korea, China, Taiwan (China), Thailand, Japan, Singapore, Malaysia, Australia, Hong Kong (China), bet88 con India.

Mr. Do Hong Cam, Deputy Director of the CAAV, said that while the Chinese market has not yet reached pre-2019 passenger levels, it has shown positive signs of recovery, while other markets have either approached these levels or experienced slight growth, with particularly strong growth seen in Australia bet88 con India.

Concerning the domestic market, airlines have had to cut seats on domestic routes due to fleet challenges, resulting in passenger declines compared to both 2023 bet88 con 2019. Despite this, airlines maintained a network of 50 domestic routes connecting Hanoi, Ho Chi Minh City, bet88 con 20 other airports nationwide. Vietnam Airlines bet88 con Vietjet Air were the largest domestic carriers, with market shares of 42 per cent bet88 con 44 per cent, respectively, followed by Bamboo Airways, with 7 per cent, Vietravel Airlines with 3 per cent, bet88 con Pacific Airlines bet88 con Vasco.

Seat utilization on domestic routes is generally over 80 per cent bet88 con on international routes over 70 per cent. Vietravel Airlines had the highest seat utilization rate, at over 90 per cent on both domestic bet88 con international routes.

The reduction in fleet size is among several factors negatively impacting airline performance. They also face challenges in leasing aircraft due to high rates. Rising fuel prices bet88 con foreign exchange rate fluctuations add to the pressure, particularly as many costs are paid in foreign currencies. Airlines such as Bamboo Airways bet88 con Pacific Airlines, meanwhile, are currently restructuring bet88 con experiencing financial difficulties. “These factors impact supply bet88 con contribute to fluctuations in airfares on domestic routes during peak periods,” Mr. Cam noted.

Preparing for wet-leases

Vietnamese carriers are grappling with a reduction in fleet size due to engine recalls by Pratt & Whitney, which have impacted the A320/321 fleets of Vietnam Airlines bet88 con Vietjet Air, while the restructuring efforts of Bamboo Airways bet88 con Pacific Airlines have naturally had an impact on their fleets. The engine recall bet88 con disruptions in supply chains for parts bet88 con materials are causing ongoing difficulties in engine maintenance, replacements, bet88 con new aircraft acquisitions, which are expected to persist through the latter half of 2024 bet88 con into 2025.

Regarding fleet changes, a senior official at Vietjet Air reported that, as of July, the carrier had grounded ten of its aircraft, with one more to be grounded in October. It has sent ten engines out for repair, with three others removed bet88 con put into storage. Another eleven engines are expected to be sent out for repair over the remainder of 2024. “Under the recall program, all 50 engines on 25 of our A321neo aircraft must be removed for repair, bet88 con this program could extend into 2025 or longer,” the Vietjet Air official said.

As of the end of June, Vietnam Airlines had grounded 12 of its aircraft bet88 con anticipates grounding 17 by the end of the fourth quarter. Pacific Airlines, meanwhile, returned all of its leased aircraft as part of its restructuring efforts, which led to a halt in operations last April. It then resumed operations at the end of June after reaching leasing agreements with Vietnam Airlines over three aircraft.

Bamboo Airways, which operated over 9,500 flights bet88 con ferried more than 1.3 million passengers in the first half of 2024, posted average seat occupancy of 85 per cent. The airline is currently restructuring its fleet bet88 con route network, leading to the return of a significant number of its leased aircraft. As of June, its fleet included seven aircraft, six of which were dry-leased bet88 con one wet-leased, with one other temporarily grounded for an engine overhaul.

It added one wet-leased aircraft in July to boost capacity for the peak summer season bet88 con is seeking additional engines to bring another aircraft into service while awaiting engine maintenance to be conducted. By the end of the year, the airline plans to lease one or two more aircraft, either dry or wet, to restore services on certain routes. However, leasing aircraft remains challenging due to high rates. The airline is considering reopening international routes it operated prior to its restructuring by the end of the year or within the first half of 2025, initially focusing on high-capacity markets like Thailand, Taiwan (China), bet88 con South Korea.

In response to the significant declines in operational aircraft, Vietnamese carriers are actively seeking bet88 con negotiating aircraft leases to replace those that have been grounded. Alongside efforts to find leased aircraft, they have also implemented various strategies to maintain or increase capacity, such as reducing turnaround times, optimizing daily aircraft use, bet88 con increasing flights during peak afternoon bet88 con evening hours. These measures have secured positive results, contributing to increased seat supply.

Vietravel Airlines currently operates a fleet of three A321-200 aircraft with CFM56 engines, which are unaffected by the global engine recall. In the first half of this year it ferried over 700,000 passengers, a 39 per cent increase compared to 2023, bet88 con posted average seat occupancy of above 90 per cent. This success is attributed to its efforts to boost capacity with additional night flights to meet passenger demand.

Though not directly affected by the engine recall, Vietravel CEO Nguyen Minh Hai noted that the carrier faces indirect challenges due to extended maintenance times caused by parts shortages, longer transportation times, bet88 con increased costs from escalating global conflicts.

During the second half of 2024 bet88 con into 2025, Vietravel Airlines plans to add another wet-leased aircraft bet88 con is negotiating to lease one or two more for the end of the year. However, high leasing rates significantly increase operational costs bet88 con affect its business performance bet88 con bottom line. Restrictions from Article 3 of Decree No. 92/2016/ND-CP, dated July 1, 2016, meanwhile, limit the carrier’s ability to lease wet aircraft.

Proposals in the pipeline

Despite the recovery bet88 con growth anticipated in the aviation market over the second half of 2024 bet88 con into 2025, airlines are still grappling with significant challenges, particularly in regard to fleet maintenance bet88 con expansion as well as rising input costs such as maintenance, aircraft leasing, bet88 con fuel, as well as fluctuating exchange rates.

In response, Bamboo Airways has suggested that the CAAV report to the Ministry of Transport bet88 con the government on extending support for airlines by maintaining lower environmental taxes on aviation fuel through the end of 2025, cutting air navigation bet88 con domestic flight landing fees by 50 per cent, bet88 con revising fare ceiling regulations based on major input costs like fuel. Such measures would help all airlines build their resources for future growth. It also called for discussions with tourism regulatory bodies to explore effective cooperation bet88 con address issues of common concern.

Vietravel Airlines, meanwhile, has been experiencing difficulties in maintaining its slot allocations due to factors such as weather, technical issues, airport capacity, bet88 con other unavoidable circumstances. Its historically limited number of slots bet88 con smaller fleet make it challenging to adjust flight schedules during disruptions, which impacts slot utilization bet88 con scheduling alignments. Engine recalls bet88 con supply chain disruptions are also hindering its search for dry-lease aircraft.

In terms of solutions, the airline’s leadership has proposed granting new slots to carriers with fleets of three aircraft or fewer, excluding wet-leased aircraft. to better manage schedule adjustments amid market fluctuations bet88 con other disruptions. They also recommend that the government consider fine-tuning or removing the restrictions on the number of wet-leased aircraft outlined in Decree No. 92, which would allow Vietravel Airlines to acquire additional aircraft.

Furthermore, its leadership proposed continuing with reductions to import taxes on aviation fuel to 0 per cent, extending the environmental tax on aviation fuel to VND1,500 (6 US cents) per liter, which is a 50 per cent reduction from the rate contained in Circular No. 53/2019/TT-BGTVT dated December 31, 2019, through to the end of 2025, bet88 con permitting airlines to impose fuel surcharges on domestic routes if Jet-A1 prices exceed 5 a barrel.

The carrier also suggested reducing ground service fees, airport management fees, bet88 con service charges for night flights, which would help lower ticket prices for passengers, as current fees include an additional 10 per cent management fee for night flights. Lastly, its advocates for relaxing visa policies between Vietnam bet88 con other countries to facilitate easier travel for more international visitors to Vietnam bet88 con for Vietnamese travelers heading abroad.