VietNamNet Bridge - …is the big worry about the market decline
not only of fledgling air carriers like Air Mekong or Vietjet Air, but also of
the national air flag carrier Vietnam Airlines, which is holding more than 70
percent of the market share.
Big sale promotion campaigns launched
Over the last three years,
passengers have been regularly enjoying big airfare discounts offered Vietnam
Airlines.
The national air carrier has
reported that hundreds of thousands of air tickets with the price discounts of
up to 50 percent are sold every year.
The big sales promotion campaigns
run by Vietnam Airlines have helped stimulate the demand, but they have put big
difficulties for other air carriers, which also had to follow the move by
lowering their airfares, and for Vietnam Airlines itself.
Indochina Airlines, which had to
stop operation just after one year of providing commercial flights, once
complained that it could not sell tickets at higher prices to make profit,
because of the cutthroat competition in the aviation market.
Vietnam Airlines is now holding
more than 70 percent of the domestic market share, considered the “eldest
brother” among the air carriers. This explains why Vietnam Airlines announces
air discount campaigns; other airlines also have to launch sales promotion
programs.
Jetstar Pacific, known as a
budget airline, which always tries to cut down expenses, also admitted that it
could not bear the air ticket price reductions in a large scale offered by the
eldest brother.
Since the airline sold tickets at
low prices, the turnover was not high enough to cover expenses. This, plus the
management problems, both have made the airline take loss continuously in the
last few years. Meanwhile, the air carrier has anticipated that the loss would
not be less than 9 million dollars in 2012.
Vietjet Air, a new comer on the
market, also had to attract more passengers by launching a series of sales
promotion campaigns, offering the air tickets with surprisingly low prices of 19,000
dong or 350,000-900,000 dong for domestic flights.
Right after Vietjet Air raised
the flight frequency, Vietnam Airlines also launched a sales promotion campaign
for the autumn season, under which 300,000 air tickets were sold at the prices
of 550,000-950,000 (one way), not including taxes and fees.
However, in fact, passengers can
still fly at “reasonable costs,” even if they do not book tickets in August.
Obtaining the tickets for the Hanoi-HCM City flights at just 1.2 million dong,
including taxes and fees is within reach of passengers.
Especially, passengers can fly
with the national flag air carrier Vietnam Airlines instead of a budget
airline, with just 1.3-1.5 million dong on the same route.
Air Mekong and Jetstar Pacific
have not run sales promotion campaigns noisily, but they have adjusted the airfares
to make the air tickets reasonably cheap to passengers, with the gaps between
the airlines’ ticket prices and Vietnam Airlines’ lowest airfare rates hovering
around 300,000-600,000 dong.
Continued loss anticipated
Explaining the currently applied
flexible airfare pricing policy, an executive of Vietnam Airlines said the
competition has become fiercer and stiffer on both the international and
domestic routes.
The executive said that its
international air routes have been influenced by the global political and
economic changes and the appearance of new competitors. Therefore, instead of
expecting high profits from international flights to offset the loss in
domestic flights, Vietnam Airlines needs to improve the exploitation efficiency
of the flights on domestic routes.
In a recent report, Vietnam
Airlines said its domestic transport output would be 7.5 percent lower than the
targeted output set up in the yearly business plan.
With Vietjet Air’s more aircrafts
put into operation and the market decline of 2.6 percent in the first six
months of the year, Vietnam Airlines’ number of passengers was 5.8 million
only, just fulfilling 96 percent of the plan.
US$1 = VND20,800
Compiled by Kim Chi
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