Although the domestic market had a strong breakthrough, the recovery of Vietnam’s aviation industry was not as expected because the international market faced many difficulties.
Domestic cannot make up for international
At the seminar on Recovery and Development of Vietnam’s aviation industry in the new context held on May 24, Mr. Bui Minh Dang, Deputy Director of the Civil Aviation Authority of Vietnam, said that in the recovery of the aviation industry, the domestic market plays a huge role. Currently, domestic transportation demand is equivalent to, or even higher than, 2019.
Dang cited, like in the summer of 2020 or the last holiday of April 30 to May 1, the restrictions related to the prevention of the Covid-19 epidemic were lifted along with the booming domestic tourism demand. The market recovered strongly.
The number of customers has not increased gradually over the months. Cumulatively in the first 4 months of 2022, the total domestic market reached 11.5 million passengers, equaling 98% of the same period in 2019. In April 2022 alone, the aviation market domestic arrivals reached 3.6 million, an increase of 19% over the same period in 2019.
However, talking to the press, Deputy Minister of Transport Le Anh Tuan assessed that the recovery of the aviation industry has not been as expected because international aviation is still facing many difficulties.
The international market only reached nearly 7% compared to the same period in 2019 and for the whole year, the output is expected to reach only about one-third compared to the time before the epidemic.
Mr. Tuan said that although Vietnam has created many favorable conditions such as removing test papers before entry, exempting quarantine, etc. However, some markets have not really opened, such as China still applying the “zero Covid” policy, Korea and Japan from June 1 to lift entry restrictions. Meanwhile, 60-65% of the revenue of airlines, especially Vietnam Airlines, comes from international routes.
“We expect that in 2022 the pandemic will end, from 2023 aviation will recover,” said Deputy Minister Tuan.
In addition, there are internal difficulties for airlines. After two years of struggling with the epidemic, domestic airlines are struggling to have money to maintain operations. Aviation human resources are not only disturbed, but in the recovery phase, they face the risk of a shortage of specialized workers, especially flight crews, technical staff, etc.
In particular, one factor that upsets the aviation recovery and development scenario is the high fuel price. According to the Civil Aviation Authority of Vietnam, the price of JET A1 fuel is over $160/barrel (up nearly 30% compared to expected) and accounts for over 40% of operating costs, which is having a heavy impact on the operations of airlines. Not to mention, the Russia-Ukraine war has also affected international aviation operations.
Consider special support packages
GS. Tran Tho Dat, former President of the National Economics University, said that the development prospect of Vietnam’s aviation industry is quite clear, which is likely to be the leading field in the recovery wave after the pandemic when domestic exploitation is breakthrough, international flights bringing foreign tourists back are also gradually vibrant.
Currently, there are some forecasts on the scale of the aviation industry’s recovery in 2022, but the average scenario with high feasibility is that this year, Vietnam’s airlines will receive 42-43 million passengers, of which there are about 8 million international visitors. Thus, the number of domestic tourists has almost completely recovered compared to before the epidemic, but the international market has decreased by 72-80% compared to 2019 and will need a longer time to recover.
In order for aviation businesses, especially airlines, to recover and develop soon, the leader of the Civil Aviation Authority of Vietnam emphasized having a sustainable capital/cash flow is very important. Besides the efforts of businesses in arranging capital, the proposal of the Aviation Business Association should also be considered and taken into account. It is suggested that the Government consider special support packages for aviation businesses such as lending refinancing packages to airlines with 0% interest rate, maximum term of 3 years or a guarantee for businesses to borrow a support package of VND 25,000 billion.
According to Dr. Tran Dinh Thien, a member of the Prime Minister’s Economic Advisory Group, we need to take advantage of the opportunity, when Vietnam has safely controlled the epidemic, to make a breakthrough. However, the situation is different now, so the solution must be different.
Mr. Thien said that it is necessary to order air and travel in the context of the recovery of the national economy, in the context of strong reopening, although some countries are still haunted by the fear of Covid. First, to ensure that the domestic market is vibrant, while the foreign market is not ready to open.
At the same time, must be more open in welcoming international guests. Currently, we are still “overdue” timidity about visa policy, while the country is very safe and very hospitable. This is also an opportunity for institutional reform, stronger reform in terms of procedures and processes.
Deputy Minister of Transport Le Anh Tuan suggested that the Government have policies to support not only Vietnam Airlines but also other airlines because aviation activities are very sensitive. Due to the epidemic, tourism and people’s travel is limited, greatly affecting the number of flights. In the context that other countries also have solutions to support aviation, in addition to the internal strength of airlines, without the support of the Government, the risk that foreign airlines with strong potential will increase competition and can influence and redraw the domestic aviation map.