By Winston Shek
Vietnam Airlines seeks to expand its cargo fleet, withdraws ATR-42s
At its annual meeting of shareholders on Wednesday, Vietnam Airlines revealed its intention to sell and withdraw its sub-fleet of ATR-42 aircraft, in addition to its ambitions to create a freight carrier.
Vietnam’s national carrier has announced plans to establish a freight carrier amid a recent spate of Covid-19 cases in the country, according to a report from VnExpress. The proposal had been on the cards for years, waiting for the right time to launch the cargo airline, according to Le Long Ha, CEO of Vietnam Airlines. Over the past two years, freight transport has generated higher revenues for Vietnam Airlines, especially in recent months, which has caused the plan to be taken more “seriously”.
In June, freight revenue – which typically accounts for 10% of Vietnam Airlines’ total revenue – surpassed Vietnam Airlines passenger revenue amid rising Covid-19 cases, which has prevented much domestic travel. . According to Vietnam Airlines, the carrier has converted five Airbus A350-900s and two Airbus A321s into cargo planes by cutting passenger seats in order to generate additional revenue.
Other carriers in Vietnam have taken note of an opportunity in the air cargo sector, such as low-cost carrier VietJet, which has converted four of its Airbus A321s into cargo planes. Among other factors, freight revenue helped VietJet to make a profit of $ 3 million, aim for 20% revenue growth in 2021.
Additionally, Vietnamese retail conglomerate Imex Pan Group plans to launch Vietnam’s first cargo-only carrier in 2022. The group plans to form IPP Air Cargo with an initial investment of $ 100 million.
According to NikkeiAsia, the airline considers that the market is now ripe for new cargo capacity in the country, citing that foreign competitors hold 90% of the air cargo market share in Vietnam. With an initial fleet of five planes, the cargo carrier aims to link domestic airports with Hanoi and Ho Chi Minh City, working with foreign companies to export Vietnamese goods.
In addition, Vietnam Airlines has announced the withdrawal of its ATR-72 fleet to improve its competitiveness on regional routes. As of 2019, the airline has been considering a replacement for the aircraft, although it is not known which aircraft will replace the ATR-72.
Currently, Vietnam Airlines operates seven ATR-72 aircraft – six of which will be available for sale – operated by its regional subsidiary VASCO. One of its ATR-72s is currently leased until August 2022, according to deputy general manager Nguyen Chian Trang.
Primarily, these 68-seat birds are deployed at regional airports in Vietnam that are unable to handle larger narrow-body planes including Ca Mau, Con Dao, Dien Binh Phu, and Rach Gai. In the past, these routes were profitable monopolies for VASCO, including flights to the Con Dao archipelago.
However, over the past year, Bamboo Airways has used Embraer E190 aircraft to add flights to destinations such as Con Dao and Rach Gai, which is a competitive advantage for turboprop aircraft. In addition, Bamboo Airways has applied for the rights to operate flights to Ca Mau with Embraer E175 aircraft and Dien Binh Phu with Embraer E190 aircraft, further threatening VASCO’s operations and competitive advantage.
The sale of the six ATRs can also be attributed to the increased cash flow for Vietnam Airlines, due to the airline’s financial condition. Vietnam Airlines announced last month that it would sell and retire 11 Airbus A321s to boost cash flow.
Also last month, the Hanoi-based airline received a $ 178 million loan from three Vietnamese banks to save the airline from bankruptcy, according to Reuters. Additionally, Vietnam Airlines said it would raise $ 347.8 million by issuing more shares to current shareholders. In previous months, banks did not extend credit to the Flag Bearer, allowing the possibility of lawsuits due to his high unpaid debt, according to Dealstreetasia.
For the first half of 2021, Vietnam Airlines lost $ 427.1 million, estimating losses of $ 631.525 million for the full year, up 30% from 2020.