Vietnam News

Vietjet poised to become Vietnam’s top airline in win for billionaire founder

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Fast-growing carrier set to surpass state-owned rival in international passengers

The balance of power in Vietnam’s aviation industry is shifting as low-cost carrier Vietjet looks likely to eclipse state-run Vietnam Airlines in international passenger numbers this year and may become the overall market leader.

Vietjet, Vietnam’s first private-sector commercial airline, launched in 2011 and has achieved rapid growth with low fares and innovative service. It has produced Southeast Asia’s first self-made female billionaire, founder and Chairwoman Nguyen Thi Phuong Thao.

Vietjet’s total domestic and international passengers appear to have exceeded 22 million for January to November in figures compiled by Nikkei, up about 20% from a year earlier on post-COVID travel demand.

The total slightly exceeds the passengers carried by the financially struggling Vietnam Airlines group, including low-cost carrier Pacific Airlines and domestic-only Vietnam Air Services.

Driving Vietjet’s growth is international flights, which appear to have carried more than 7 million passengers. The company’s share of Vietnam’s international passenger travel, excluding foreign airlines, is estimated to exceed 50%.

Thao told a shareholders meeting in April that Vietjet would be a “pioneer” that charts new courses. Since the start of 2023, the airline has launched new routes between Vietnam and Jakarta, Australia’s Adelaide and Mongolian capital Ulaanbaatar. Flights to Tokyo’s Haneda Airport also began.

It had 80 international routes at the end of September, up by 32 from the end of 2022 and surpassing Vietnam Airlines.

As the government has worked to develop friendly relations with various countries in recent years, Vietjet has swooped in and opened new routes to these destinations, playing a role normally filled by a flag carrier.

Vietjet’s revenue for the January-September period rose 59% on the year to 43.7 trillion dong ($1.8 billion). It posted a 416.1 billion dong operating profit, up from the year-earlier 137.2 billion dong loss. The average seat occupancy rate was high at more than 85%.

Its regular fares are often 30% to 40% cheaper than full-service Vietnam Airlines. With consumers tightening their purse strings as the economy loses steam, the airline has expanded its international routes and launched low-cost routes, giving it a leg up in the battle for market share.

With her airline the only major airline in the country still turning a profit, Thao has increased her presence as the face of Vietnamese aviation.

Before Vietjet, Thao studied in Russia and started a trading company. She became rich at a young age and entered banking before setting her sights on the airline industry.

Vietnam protects such important industries as telecommunications and resource development with heavy regulations, and state-owned enterprises have high market shares. Its airline industry has long been dominated by Vietnam Airlines. Thao saw potential for more, and cheaper, air travel demand between Vietnam’s north and south.

She has not shied away from controversy with headline-grabbing moves like bikini-clad flight attendants and free ticket offers. She built Vietjet’s foundation on the busy Hanoi-Ho Chi Minh City route and charted a path to growth by investing profits from domestic routes in expanding international ones.

“It’s full of opportunities, but also changes and challenges,” she said of the business environment at a November event attended by officials including Prime Minister Pham Minh Chinh.

With air travel rebounding from COVID-19 this year, Vietjet is moving aggressively to capture demand. It ordered 200 units of the Boeing 737 Max plane for $25 billion, with delivery scheduled to begin in 2024.

Vietjet’s pursuit of growth has not been without problems.

Its on-time performance is one of the lowest among the country’s airlines. Its percentage of on-time flights dropped to 75.2% in November, according to the Civil Aviation Authority of Vietnam, while Vietnam Airlines and fellow domestic carrier Bamboo Airlines came in above 90%. It has also been criticized for overworking pilots.

Vietjet is also involved in litigation over aircraft leases. British investment fund FitzWalter Capital seeks $191 million from the company, alleging it to have defaulted on lease payments for four aircraft. The case has been brought before Vietnam’s top court.

Meanwhile, Vietnam Airlines posted a July-September net loss of 2.2 trillion dong — its 15th consecutive quarterly loss. At a shareholders meeting on Dec. 16, Chairman Dang Ngoc Hoa said the airline had submitted a restructuring plan to the government, its top shareholder. He said Vietnam Airlines aims to break even in 2024.

By Yuji Nitta – Nikkei Asia – December 23, 2023

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