Friday, May 22, 2009

Airlines crying ‘crisis’


21:28' 21/05/2009 (GMT+7)

VietNamNet Bridge – The economic downturn has made domestic airlines suffer. They have been losing money on domestic air routes, and losing out to foreign airlines on international short-distance routes. Meanwhile, Circular 103 on removing the ceiling airfare, which is thought will ‘untie’ air carriers, has not been promulgated yet.

 

No new licencing until 2015

 

Do Duc Tu from the Department for Infrastructure and Urban Centres under the Ministry of Planning and Investment said that the national flag air carrier Vietnam Airlines has had tremendous difficulties since the first quarter of 2009 with the number of passengers down by 3.3 percent. The airline is forecast to obtain the growth rate of only 4.9 percent this year, while the rate was 15.8 percent in 2008.

 

Jetstar Pacific Airlines (JPA) is maintaining its growth with the number of its passengers increasing significantly by 28.7 percent in Q1. However, the figure is still much lower than the increase of 54.6 percent in 2008.

 

Indochina Airlines, a private air carrier, which has been operating for the last six months, has had to halve the frequency of its Hanoi-HCM City flights. The air carrier has also cancelled a contract on chartering an additional aircraft; it is now using only one aircraft with 282 seats and offering four flights a day.

 

Vietjet Air, the first private airline, which was licenced two years ago, has not been brave enough to offer flights yet. The airline’s flight schedule may be delayed until October after two previous delays.

 

Its operation licence will become invalid if it does not provide flights prior to December 2009.

 

The Civil Aviation Administration of Vietnam (CAAV) has revealed that it may not licence new airlines until 2015.

 

No domestic airline, from Vietnam Airlines, VASCO, JPA to Indochina Airlines, has been making profit on domestic routes.

 

Luong Hoai Nam, General Director of JPA, said that Vietnam’s aviation’s market share for short-distance air routes (less than 3 hours) has been significantly narrowed from 35-40 percent to 15-20 percent due to the dominance of foreign airlines.

 

There were only three flights a week on the Hanoi-Kuala Lumpur route when Vietnam Airlines was the sole air carrier with the route. The number of flights increased to seven when another airline jumped in, and then doubled to 14 flights a short time later. The same situation has been occurring with flights to Singapore and Thailand.

 

While foreign airlines have raised the number of flights by many times, Vietnamese airlines have just been maintaining one or two flights a day. The losses from domestic routes have made Vietnamese air carriers hesitant to compete with foreign air carriers for domestic routes, thus they have step by step yielded the way.

 

A tightened mechanism

 

Nam said that the current airfare management mechanism also shows shortcomings. Relevant ministries have released Circular 103 on removing the ceiling airfare scheme on domestic flights, but the circular has not been brought to life yet.

 

Meanwhile, no concrete solutions have been suggested to help airlines escape from crisis. At a workshop to discuss ways to rescue air carriers held in Hanoi yesterday, solutions mentioned there were vague, and aimed principally at helping develop the aviation industry in the long run rather than help it out of its current difficulties.

 

The workshop was scheduled to take place earlier this year, but it was not organised until yesterday, when the airlines are already in the grip of a crisis.

 

Ha Yen

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