Aviation market: not easy for those, who come later

The fact that the nonpublic airline Vietjet Air present cater the original advertisement flights in tardily Dec cannot alter the incumbent situation in the traveling marketplace,Skyteam that the tame artistry mart is allay beingness obsessed by the federal alarum air vector Annam Airlines which is now holding solon than 80 percent of the market share.

The last week witnessed three important pieces of news. Vietjet Air, a private airline, will officially join the domestic aviation market on December 2, and announces the launching of its first commercial flight on December 25.

In the first phase of operation, Vietjet Air will develop the HCM City – Hanoi air route.

Commenting about the event, Luu Thanh Binh, Deputy Head of the Civil Aviation Authority of Vietnam CAAV, said that the opportunities for the airlines which have joined the market like Vietjet Air are very big.

However, the two other pieces of news, also released last week, show the contrary thing. An official of CAAV informed at a regular press conference held by the Ministry of Transport in late November that Indochina Airlines have had its operation license revoked.

Dinh Viet Thang, Deputy Head of CAAV, has confirmed that the license has been revoked after the ministry found out that Indochina Airlines has stopped operation for the last 12 months, and that the air carrier is not capable to resume flights.

In fact, the information did not surprise anyone, because Indochina Airlines has not been taking any activities in the last many months, and all the efforts of the air carrier to restart its operation all have failed completely.

Also according to Thang, Jetstar Pacific JPA, a budget airline, has also been facing a lot of difficulties despite the great efforts to restructure the airline. The Ministry of Finance is considering transferring JPA to Vietnam Airlines.

Commenting about the latest news, experts say that the information shows that the domestic aviation market is really very tough for those, who come later.

Sharing the same view, Chu Viet CUong, Managing Director of Vietjet Air, admitted that the airline is bearing a hard pressure after joining the aviation market, and that it is very likely that the airline would incur loss.

With the estimated cost of 250 million dong for a flight with Airbus 320 on the HCM City – Hanoi route, Vietjet Air needs to see at least 80 percent of seats occupied to break even. This is really a very difficult task for such a new comer on the market such as vietjet Air.

President of Air Mekong Doan Quoc Viet also said that though the airline has prepared well for the first phase of operation, the business performance is still far below the expectation, because of the big fluctuations of the input costs.

Viet said that the dong/dollar exchange rate has been fluctuating with the dollar price having increased by 10 percent over the last year. Meanwhile, the fuel price has been increasing dramatically, and the labor cost has also increased. Especially, while the input costs have increased, the revenue has not increased accordingly, because the government still sets up a cap on the airfare. Meanwhile, Air Mekong has to compete fiercely with other airlines that provide domestic flights.

The information that JPA may be put under the control of Vietnam Airlines has raised new worries about the competition of airlines. Statistics show that by mid 2011, Vietnam Airline3s had held 80 percent of the market, while JPA 17 percent, which means that after the merging, Vietnam Airlines would hold 97 percent of the market share.

Analysts say that Vietjet Air and Air Mekong will have to struggle to hold the remaining three percent. Any move to be taken by Vietnam Airlines, the elder brother, especially in the airfare policy, the sale promotion campaigns and land services, would have big impacts on the market and influence the operation of other airlines. Of course, in the competition with the giant Vietnam Airlines, private small air carriers would be on the lower hand

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