Vietnam Airlines plans to launch a new long-haul route to Los Angeles (LAX), the first nonstop between the United States and Vietnam. With US tourism to Vietnam up nearly 12% and a booming aviation sector in the country, flag carrier Vietnam Airlines is keen to beat rival Bamboo Airways in the US market. The new route will initially result in a heavy loss of US$54 million, according to the carrier’s claim.
Vietnam Airlines plans to lose millions on its first US route
In its March 2019 submission to the U.S. Department of Transportation (DOT), Vietnam Airlines included estimated traffic and financial results for the first full year of operation on its proposed route to Los Angeles (LAX). Despite projecting a loss of $54 million, Vietnam Airlines reiterated its support for the market, saying:
While Vietnam Airlines predicts that the SGN-LAX route could produce a loss during [its] the first year, VNA is ready to invest in the road to achieve its long-term road network objectives
Vietnam Airlines expects total passenger numbers of around 136,000 in its first year of operation and estimated operating costs of $143 million.
Zoom in on the numbers
Last month, Simple Flying reported that Vietnam Airlines was considering the 777X or a larger A350-1000 model for its new Ho Chi Minh City (SGN) – Los Angeles (LAX) route. The Boeing 777-9X seats up to 425 passengers in a higher-density two-class configuration, while the A350-1000 seats 366 in a typical configuration (competitor Cathay Pacific has 334 on its A350- 1000).
Vietnam Airlines estimates an average fare of around $625, based on total passenger revenue of $85 million:
$85M annual revenue ÷ 136,000 pax = $625
That seems low for a long-haul flight, though Vietnam Airlines likely accounts for competition from aggressively priced one-stop routes from Chinese carriers.
Fuel is a third of the total cost of the flight
Vietnam Airlines estimates an annual operating cost of around $143 million. About $50 million of that high price is fuel, accounting for more than a third of total operating costs.
FAA gives Vietnam a Tier 1 rating
On February 14, 2019, the FAA granted Vietnam a Category 1 safety rating. With the new classification, Vietnamese airlines can request routes between the United States and Vietnam. They can also share codes with US airlines, like Delta, another SkyTeam partner.
The Tier 1 rating is the result of an August 2018 FAA assessment. The rating also signifies that Vietnam meets International Civil Aviation Organization (ICAO) standards for safety, licensing and airworthiness of aircraft.
Delta Air Lines is making additional cuts to its transpacific network.
About the Author