33 years on, Pacific Airlines still struggling to take off

Pacific Airlines was expected to dominate the low-budget aviation market and operate 40 jets, but after three decades the airline has only debts and no aircraft.

The number of Pacific Airlines jets was reduced to none last week as the airline was owing leasing companies US$200 million and was struggling to repay.

Pacific Airlines said it would lease three jets from its parent company Vietnam Airlines for now.

Established in 1991 as a state-owned company in which the government held a 86.5% stake, it was restructured in 1993 and made a subsidiary of Vietnam Airlines.

In 2006 the government handed over the airline to the State Capital Investment Corporation (SCIC), a sovereign fund set up to also manage state-owned companies.

In 2007 SCIC sold an 18% stake to Australian airline Qantas, and the carrier was renamed Jetstar Pacific.

But by then it was on the verge of bankruptcy. In 2008 the government agreed to sell more shares to Qantas to help Pacific recover.

Its financial situation began to improve, and in 2009 it even posted its first ever quarterly profit.

But violations related to maintenance and safety oversight caused controversies, and the Ministry of Transport even had to issue a public statement assuring that people are safe to fly on Jetstar Pacific.

In 2012 the SCIC transferred part of its stake back to Vietnam Airlines.

In 2020 Qantas divested its stakes in it and the airline’s name was changed back to Pacific Airlines.

Although Vietnam Airlines planned at the time to expand Pacific Airlines’ fleet to 40 jets, it was never able to achieve the goal. At its peak Pacific had 20.

Its financial situation never improved. In over three decades Pacific Airlines has only achieved profits four times, the highest being VND112 billion in 2015.

After the Covid-19 pandemic, its struggled worsened. Between 2020 and 2022 it reported losses of over VND2 trillion each year.

Nguyen Hai Quang, head of the business management faculty at the University of Economics and Law, Vietnam National University HCMC, and formerly of the Aviation Academy, said Pacific Airlines has been struggling all these years because it lacks financial resources.

The airline is hamstrung by inflexible mechanisms typical of state-owned companies, he said.

Meanwhile, its competitor, Vietjet Air, has been expanding rapidly.

Established almost two decades after Pacific Airlines, Vietjet now operates 86 jets on 125 domestic and international routes.

The low-cost market is now dominated by Vietjet as Vietravel Airline, the latest carrier to join the aviation market, only has three jets while Bamboo Airways is restructuring.

Quang said in the short term Pacific Airlines’ lack of a fleet would not trouble the aviation industry since domestic demand is currently low.

Vietnam Airlines still has two months before summer, the peak travel season, to lease jets to it, he added. Vietnam Airlines has said it is looking for new suitors for Pacific Airlines.

Pacific Airlines operates ground services at three major airports, Hanoi, Da Nang and HCMC, which makes it more attractive to investors than Vietravel Airlines, which is also on the lookout.

Pacific Airlines also owns flight slots during prime hours at key airports.

By Anh Tu – VnExpress.net – March 27, 2024