Airlines strive to make ends meet

09:00 | 08/05/2020
As Vietnam’s aviation industry faces an unprecedented crisis while waiting for a bailout from the government, the country’s airlines are struggling to find solutions to save themselves.
airlines strive to make ends meet
Airlines are having to focus more on cargo operations and cost-cutting. Photo: Le Toan

Noi Bai and Tan Son Nhat international airports have been deserted with aircraft sitting empty on the tarmac or in repair workshops for the past few weeks. In March, Vietnamese airlines gradually cut domestic and international flights due to the effects of lockdown and travel restrictions.

Domestically, things have been looking up slowly after the social distancing order was ended on April 23. Commercial airlines in the country have quickly resumed domestic routes and increased flight frequency. The Hanoi-Ho Chi Minh City route will be operated with a total frequency of 20 round trips per day; Hanoi/Ho Chi Minh City to Danang and vice versa will have six flights per day; Hanoi/Ho Chi Minh City routes to other localities, and routes between other localities not involving the two biggest cities are also allowing each airline to operate a return flight every day.

Local carriers are in dire straits. With more than 100 suspended operations, the national-flag carrier Vietnam Airlines has the most affected by the pandemic. The company CEO Duong Tri Thanh said that its 2020 revenue is expected to decrease by VND50 trillion ($2.17 billion), and more than 10,000 employees will have to temporarily leave their jobs. Thanh said it will take at least five years for Vietnam Airlines to offset the loss.

Although the majority of planes are not allowed to take off, Vietnam Airlines, like others, is still struggling to cope with a series of additional costs. Currently, the carrier is paying more than VND3.3 billion ($143,500) each month for parking costs.

Budget airline Vietjet also pays about VND3.6 billion ($156,500), Bamboo Airways pays VND 1.24 billion ($54,000), and Jetstar Pacific Airlines forks out VND 720 million ($31,300).

Airlines also have to pay more for sterilising their aircraft. According to information from Vietnam Airlines, the company has to pay for disinfecting and cleaning aircraft at a cost of VND3.2-6 million ($139-$260) per unit.

By mid-March, Vietnam’s aviation industry had lost up to VND30 trillion ($1.3 billion), with that figure expected to double. The bleakness of Vietnam’s aviation industry is considered a simple consequence of the chain reaction caused by most of the world’s aviation industry being negatively affected by the pandemic.

According to calculations by the International Air Transport Association (IATA), 19,000 of 21,000 aircraft worldwide are temporarily suspended. Just a month after the outbreak, China – the third-largest aviation market – quickly dropped to 25th position because 80 per cent of incoming and outgoing flights were cancelled by international airlines, while Chinese airlines also had to cancel the flights of 10.4 million passengers.

From there, the shadow spread to the world aviation industry as many other Asian countries followed by Europe and North America gradually became the focus of strict lockdown measures. Nearly 40 per cent of the world’s flights are affected by the US ban on Europe. Ryanair, the airline with the largest number of passengers in Europe, said it did not expect to resume normal operations next month.

By the end of March, the world’s aviation industry had lost about $314 billion. According to estimations by the World Economic Forum, the combination of flight cancellations and restriction of entry will cause the world’s aviation industry to lose about $880 billion for the whole year.

Solutions in the storm

A number of airlines globally are seeking government bailouts. British airlines asked for more than $9 billion in government bailouts, while the American Aviation Trade Association also called for a $58 billion government package. Some governments agree that aviation is at the top of rescue lists. However, while waiting for supportive policies from competent agencies, airlines are having to reduce operating costs and staff, cut routes, renegotiate contracts with suppliers, and operate smaller, cost-saving aircraft.

Glen Hauenstein, president of Delta Air Lines, said ordinary airlines would try to attract tourists by reducing ticket prices, but this policy would not work during the outbreak. Currently, Delta Air Lines is also implementing measures to cut spending, stop hiring employees, request employees to take voluntary leave without pay, postpone voluntary pension contributions, and suspend stock acquisition activities.

Meanwhile, American Airlines announced it would cut 10 per cent of its international flights this summer and postpone training of new pilots and flight attendants.

In Europe, Norwegian Air said it would cut a large number of workers and 15 per cent of flights to mid-June. This is also the solution applied by many major airlines in Asia such as Cathay Pacific, Korean Air, Virgin, Thai Airways, and AirAsia, among others.

In Vietnam, state-run Airports Corporation of Vietnam (ACV) has decided to reduce services to share difficulties with airlines. Dinh Viet Thang, director of the Civil Aviation Authority of Vietnam said, “We are worried that some firms will not survive. Vietnam’s aviation has never been in such a difficult situation.”

In addition to cutting costs, Vietnamese airlines are also implementing many solutions to temporarily solve short-term difficulties.

Incentive measures

Vietnam Airlines has stepped up the operation of cargo flights to optimise available resources and contribute a part of the revenue to its business and production activities when it has to cut passenger flights. In April, the carrier operated about 150 flights carrying freight on domestic routes.

On international routes, the airline also operates more than 130 cargo flights to Northeast and Southeast Asia, Europe, and Australia. Previously, Vietnam Airlines branches in China and South Korea also organised operations of freight-only flights.

The airline also offers an empty seat option service for guests with high privacy needs. Passengers can buy a maximum of 18 empty seats for €2 ($2.17) per seat, equivalent to VND52,000 each, to increase safety when keeping distance from people.

Meanwhile, Vietjet and Bamboo Airways immediately introduced a service package enabling customers to fly unlimited times for a certain period with partial or full pre-payment.

The Vietjet programme, Power Pass, consists of two prices of approximately VND9 million ($390) and VND17 million ($740). The original ticket will be free, with no fee for 15kg of checked baggage and 7kg of hand luggage, and an unlimited number of flights on all domestic routes of the airline during the validity period of the pass. In addition, Vietjet is also strengthening cargo flights and is launching attractive incentive programmes with discount fares of up to 70 per cent on all domestic and international flights until mid-June.

Bamboo Airways is implementing a package equivalent to the price of VND9.8 million ($430), including free 2-night stays at the FLC hotel resort system. Moreover, it also launched high-priced prepaid cards with four different levels.

Previously, Vietnam Airlines, Vietjet, and Bamboo also co-operated with the Vietnam National Administration of Tourism and travel companies to form a stimulating tourism union. The essence of the co-operation is to mobilise the collective strength of businesses in the same field, promoting safe destinations in Vietnam with cheap package tours, including air tickets, hotels, and other services.

By Hoang Oanh

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