Vietnam Airlines shortens its road to recover
Vietnam Airlines' situation reflects the general difficulties of the current aviation market. Photo: Quy Hoa.
Vietnam Airlines' Board of Directors has postponed the 2023 Annual General Meeting of Shareholders for the second time in a month and has not yet announced its audit report for 2022.
The delay reflects the difficulties that the national airline is having to deal with. In the third quarter of 2023, the airline recorded net revenue of nearly VND23,600 billion, an increase of 11% over the same period.
Gross profit was 7.5 times higher than the same period, reaching VND1,240 billion. In 9 months, Vietnam Airlines has conducted more than 114,000 flights and transported more than 18 million passengers, leading the country's aviation industry with nearly 43% market share.
Although this is a positive number, it is not enough to offset the entire sharp increase in costs. Most significantly, financial costs increased by 24% to nearly VND1,900 billion, of which the majority were exchange rate losses and loan interest. Selling expenses also increased by 61% to nearly VND1,400 billion.
Therefore, although accumulated in the first nine months of the year, Vietnam Airlines recorded net revenue of nearly VND67,600 billion, an increase of 32% over the same period, but a net loss of more than VND3,700 billion, lower than the loss of VND7,800 billion in the same period.
Vietnam Airlines' situation reflects the general difficulties of the current aviation market. According to the Vietnam Aviation Administration, there were 5.4 million air passengers in October, up 11% from the same month in 2022 but down 1% from September 2023.
Of those, 2.6 million passengers traveled by international passenger transport, which is up 69% from October 2022, down 0.5% from September 2023, and the same as 84% from September 2019.
Domestic passenger transport reached 2.7 million, 15% less than in October 2022 and 1.2% less than in September 2023. This is because it is not a busy time of year. This is also the third consecutive month that domestic passenger transport output has decreased compared to the previous month.
The domestic aviation market in Vietnam has cooled compared to last year, but it still maintains positive growth. Despite reaching the target of 8 million passengers in the international tourist market, many airlines face difficulties.
Vietnam Airlines' international revenue increased due to recovery in European, Australian, and US markets, but the decline in Northeast Asia markets, including China, Japan, Korea, Taiwan, and Hong Kong, which accounted for 70% of visitors before the epidemic, remains a significant issue.
In fact, promoting international market exploitation helps Vietnam Airlines significantly improve its gross profit margin to about 5-8%, but still very thin compared to before the epidemic. Also facing these difficulties, Bamboo Airways has temporarily stopped operating most international flights to Europe, Asia, and Southeast Asia. According to the plan, Bamboo Airways will reduce its fleet from 29 aircraft to 11–13 aircraft in the coming period.
The international market in Vietnam has grown nearly 300%, but the Civil Aviation Authority and airlines acknowledge that international visitors have not reached their expectations. The slow recovery has led to companies focusing on the domestic market, which is facing difficulties due to reduced purchasing power and excess supply.
This situation negatively impacts the prices and revenues of firms. Besides, although the situation has recovered, many airlines, such as Vietnam Airlines, are still under pressure to repay previously incurred debts, along with increased interest rates in recent times.
In addition to fuel prices, interest rates, exchange rates, and many other input factors are all at a higher level, causing a significant disadvantage for beautifying the financial statements. Therefore, the Committee for Management of State Capital at Enterprises (CMSC) made an optimistic estimate that Vietnam Airlines could lose more than VND 4,500 billion in 2023.
Therefore, Vietnam Airlines, as well as most Vietnamese airlines, are having to implement many solutions, including financial restructuring, aircraft fleets, organizational structure, and business plans. Among them, financial restructuring, additional capital, cash flow, and cost cutting are considered the most important solutions for doing business effectively in a difficult context.
VDSC Securities Company analysts predict a normalization in international passenger numbers growth in 2024, leading to a 42% increase in EBIT due to a higher international market volume contribution, higher airline service fees, and higher profit margins. This trend, if the international tourist market recovers to pre-epidemic levels, will benefit businesses like Vietnam Airlines in the industry.
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