Vietnam's budget airlines soar past passenger trains

By August 25, 2016 | 09:19 pm PT

Despite holding a monopoly on the market, Vietnam Railways has been derailed by air transport.

Budget airlines have quickly gained a market share in Vietnam in recent years, leading to a sharp decline in the number of passengers traveling by train.

Vietnam Railways said its revenue halved in 2015 from the previous year due to weakening passenger demand.

The state monopoly's revenue fell to VND2.6 trillion ($119 million) in the 2015 fiscal year, according to a company statement.

Trains carried just 4.5 percent of all inland passengers in 2015, said CEO Vu Ta Tung, adding that passenger numbers have been falling for the past few years.

Tung said that budget airlines are rapidly increasing their market share in Vietnam with annual growth of 15-20 percent, leading to a sharp decline in the number of passengers traveling by train.

Official statistics show that the number of passengers on domestic flights increased 1.5 times to 20.7 million in 2015 from 14 million in 2010.

The number of passengers who used trains in 2015 was estimated at 11.2 million, the lowest figure since the peak of 12.2 million in 2011.

The railway operator’s net profit for 2015, however, remained roughly the same as the previous year at VND39.7 billion, as the state-run company has taken advantage of its position to expand its services from passenger and freight transportation to logistics and distribution.

Vietnam Railways also managed to cut its operating costs to VND359 billion in 2015 from VND917 billion in 2014.

The corporation continued to experience a slowdown in the first six months of 2016, with a 13 percent drop in revenue on-year, partly due to the collapse of the Ghenh Bridge.

The Ghenh Railway Bridge, a main railway link between the north and south, was shut for three months for repairs after an 800-ton barge hit and seriously damaged the 100-year-old bridge on March 20.

The Ministry of Transport has agreed to fund Vietnam Railways with VND11 trillion from 2016-2020 in an effort to boost transport capacity.

According to the development plan, Vietnam Railways will invest VND12.2 trillion on infrastructure and VND4.14 trillion on new trains over the next four years.

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