Feb 2, 2013

Vietnam - A Vietnamese airline stops flying after Tet

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VietNamNet Bridge – A private airline may have to stop flying after Tet (February 2013), Tien Phong has quoted its sources from the Civil Aviation Authority of Vietnam (CAAV) as reporting.

If this happens, this would be the second private airline which has to stop providing commercial flights in Vietnam. The first one was Indochina Airlines which had to stop flying just after one year of taking off.

Economists say private airlines die young because they have wrong assessments about the domestic aviation market. The reports about the sky high number of 12 million passengers in 2011 provided a wrong panorama about the market. It made investors think that the market was really very lucrative, thus urging them to pour money into the business field.

“In fact, only 3 million out of the 12 million passengers a year traveled by air. Of this amount, only one million are regularly travelers. As such, the market is not big enough for so many airlines to earn money,” an expert said.

The appearance of many airlines in the small aviation market explains why the air tickets in Vietnam are getting cheaper, even though the government has set a much higher ceiling for the airfare. This means that airlines now can set up the airfares at higher levels, but they dare not do that in the stiff competition with redoubtable rivals.

Previously, many businessmen booked business class tickets in order to have the opportunities to discuss business with partners. But nowadays, they tend to book the seats at first class compartment and take a nap while waiting for the arrival.

Especially, many people said they could book tickets at low prices on the days just before the departure time. Meanwhile, in principle, they have to pay higher if they book tickets at the moments closer to the flight departure.

The appearance of Vietjet Air and Air Mekong has made the market, which once comprised of Vietnam Airlines, Vasco and Pacific Airlines, more competitive.

The competition has become so stiff that Vietnam Airlines, a traditional airline, which did not intend to fly as a budget airline, now has to change its mind and is offering different ticket prices, including low cost tickets as well.

In fact, Vietnam Airlines admitted that the air carrier finds it difficult to make profit with the domestic flights, while it has to earn money from many other services, including the land services.

It seems that every operational airline has found its reasonable market segment. High income earners or passengers on international air routes would book flights with Vietnam Airlines. Jetstar Pacific, positioned itself as a budget airline, and Vietjet Air serve popular customers. Air Mekong has advantages in niche markets such as the air routes to islands and the Central Highlands. Meanwhile, VASCO provide flights on short distance routes

Because of the big difficulties in the aviation industry in 2012, in 2012, the budget airline Jetstar Pacific nearly did not run advertisement campaigns, but it “flew in quiet.”

Jetstar Pacific’s General Director Le Hong Ha, when asked how the airline can provide flights at really low costs, said: “We have cut down all kinds of expenses as much as possible.”

Elaborating on this, Ha said that Jetstar Pacific develops in-land services with its own equipment instead of leasing equipment from Vietnam Airlines or airports. It also tries to fix problems with its own engineers. And especially, even pilots and stewardesses have to take some extra works.

Pham Huyen

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