High fares boost airlines' revenues, profits in Q1

By Anh Tu   May 7, 2024 | 08:54 pm PT
Airlines’ revenues increased sharply in the first quarter of this year mainly due to high fares, with some even making profits for the first time since the Covid-19 outbreak.

The country’s two biggest carriers, Vietnam Airlines and Vietjet, reported increases of 25% and 38% in consolidated revenues to VND28.27 trillion (US$1.13 billion) and VND17.79 trillion.

This was the former’s highest ever quarterly figure, surpassing the VND25.5 trillion it made in the first quarter of 2019. Thanks to the record revenues, it also broke a streak of 16 quarters of losses. Its consolidated after-tax profit was VND4.44 trillion.

Vietjet’s after-tax profit was VND540 billion, a 200% increase year-on-year and the highest for the budget carrier since 2020.

Another low-cost carrier, Pacific Airlines, also broke its streak of losses since the pandemic.

Vietravel Airlines, the newest in the aviation industry, saw revenues jump by 40% to VND490 billion. It has three aircraft operating on domestic routes, two regular international routes and a number of charter flights to foreign destinations.

The sharp rise in revenues kept it profitable for the first quarter (VND10 billion) for the first time since 2021 when it started operations.

The first quarter is usually a favorable business period for airlines because of the Lunar New Year surge in travel. This year they recorded bigger profits than usual partly thanks to an increase in domestic airfares.

The shortage of aircraft due to engine maintenance has caused airlines to reduce services, making tickets scarce at certain times.

Vietnam Airlines has to ground 12 A321 aircraft, representing 20% of its domestic fleet, for up to 300 days due to engine issues, as supply chain disruptions have doubled the maintenance time, its CEO said in February. Vietjet may also have fleet trouble due to the engine issues.

The problem is caused by a rare condition in the powder metal used to manufacture certain engine parts, a concern flagged by Pratt & Whitney in July 2023 as affecting engines produced between October 2015 and September 2021.

From March 1 the ceiling prices of domestic airfares on most routes rose by some 5%. The highest fare for the 1,280-km Hanoi - Phu Quoc flight is VND4 million, VND250,000 higher than in the past.

Bamboo Airways restructured at the end of last year, downsized and has retained only a few aircraft. Pacific Airlines has stopped operating after ending the lease on all its aircraft at the end of March.

The full-fare domestic market is almost entirely with Vietnam Airlines, while the budget segment belongs to Vietjet.

With demand for international travel recovering, the two are opting to reduce the frequency on some routes or suspend them altogether to focus on flying abroad. This is also a factor in increasing their revenues sharply.

Vietjet’s number of international flights and passengers in the first quarter increased by 53% and 61% year-on-year.

As for Vietnam Airlines, international flights accounted for nearly VND18.3 trillion of its total revenues of VND28.27 trillion, or 65%.

The international market had only accounted for 21.5%, 48.8% and 60.9% of revenues in the first quarter of the three previous years.

SSI Securities Corporation forecast airlines will make bigger profits this year due to a higher number of international passengers and lower fuel costs. "2024 will be the final stage in the aviation industry’s recovery process."

According to its baseline scenario, in the last quarter of this year international passenger numbers will return to 2019 levels though domestic numbers are expected to stay flat.

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