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JUNE 2021

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Vietnam’s airlines forecast for explosive growth to 2030

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June 1st 2021

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Apart from a recent spike in COVID-19 outbreaks, Vietnam has coped much better with the pandemic than most of its Asia-Pacific neighbours. Read More »

Now, after taking note of a rapid pre-pandemic rise in passenger numbers, Vietnam’s aviation leaders are forecasting airport infrastructure must more than double in the next five years to accommodate air travel growth.

Airports Corporation of Vietnam (ACV) said more than US$1 billion was invested in airport infrastructure from 2016 to 2021, but the sector would need another [estimated] $5.2 billion to 2026 to meet aviation infrastructure targets.

Pre-pandemic, Vietnam was among the top ten countries in the world for passenger growth to 2040. Its passenger and cargo traffic, in a nation with a population of 101 million, recorded average growth of up to 17% from 2012 to 2019.

But a recent report from the CAPA consultancy said there were questions to be answered about the government’s selection of infrastructure projects, their geography and the accuracy of travel growth forecasts.

Of greater concern, said the consultancy, was the availability of funds and skilled manpower to complete the technologically sophisticated projects. “Increasingly, the government might have to rely on airlines to finance the airports,” it said.

Vietnam Airlines (HVN) recorded the country’s biggest loss, nearly US$217 million, in the first three months of 2021, an increase of more than 90% against the same period last year.

At March 31, HVN had accumulated more than $616.5 million in losses, exceeding its charter capital and reducing the company’s equity from $260.5 million to $43.4 million.

The carrier also has debt of nearly $2.6 billion, of which $550.9 million is in short-term liabilities and $939.5 million is in long-term liabilities, leading to a debt to equity ratio of 57.7, an extremely high-risk level.

Privately-owned LCC, VietJet, is doing better than its state-controlled rival, but its margins are slim. In 2020, it reported a $3 million after tax profit on revenue of $790 million. Approximately 50% of that sum came from ancillary revenue. In May, VietJet offered passengers hundreds of thousands of tickets, priced from zero đồng, to contribute to recovering local economic activity.

For the first quarter of this year, VietJet reported a $5.3 million after tax profit. The results were generated from investments in finance and projects and new aviation services developed to offset the stagnant air transport business, the company said.

Hybrid carrier, Bamboo Airlines, reported a pre-tax profit of $17 million for 2020, 34% down on its 2019 results. It appears to be forging ahead with long-haul flights. It has been cleared to operate to London, Los Angeles and San Francisco. It had intended to commence its service to the UK this month, but has delayed the launch. Its U.S. flights are planned from September.

Another newcomer, Vietravel Airlines, which began flying in January, has been plagued by rumours its owner, the Vietnam Travel and Marketing Transport (Vietravel), is planning to sell the carrier. But the chairman of Vietravel’s board of directors, Nguyen Quoc Ky, has strongly denied the reports. It was intended to separate the airline company from the travel group, he said.

The Airport Construction Database has calculated construction projects at existing airports, of which the biggest are in Hanoi and Ho Chi Minh City, collectively amount to $9.6 billion, with completion dates from late 2021 to 2030. In addition, the ‘New Airports under Construction’ database for Vietnam lists six entries for the country, including the $16 billion plus Long Thanh airport at Ho Chi Minh City. “It was intended to supplement capacity at Ho Chi Minh City’s existing airport, but ambitions have gone beyond that, as Vietnam may attract over 205 million air passengers by 2038,“ CAPA consultancy said.

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