Vietnamese airlines suffer huge losses due to rising fuel prices

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HANOI (Vietnam News/Asia News Network): Vietnamese airlines suffer losses amounting to hundreds of billions of đồng every month due to soaring fuel prices, says Aviation Authority director Civil Việt Nam (CAAV) Đinh Việt Thắng.

At a Transport Ministry conference reviewing its work in the first half of the year earlier this week, Thắng said fuel costs accounted for 40-50% of operating costs and revenue increases were insufficient to offset the high fuel prices.

He said domestic air travel has resumed with higher growth than in the pre-pandemic period. However, Vietnamese carriers had not completely escaped the difficulties caused by the slow recovery of the international market.

It has been estimated that national carriers have suffered a loss of almost VN100 billion per month due to the surge in jet fuel prices.

Trần Thanh Hiền, the chief accountant of Vietnam Airlines, said Jet A1 prices averaged $72 a barrel in 2021, and the carriers developed the scenario where the average jet fuel price was $110 for 2022. However, the price of fuel reached $162, twice as high as last year.

If fuel prices continue to rise and are kept high for a long time, no carrier will make a profit, Hiền said.

As domestic airlines grappled with high fuel prices, the CAAV proposed that the Department of Transport consider reducing the environmental tax on fuel while gradually easing caps on domestic ticket prices so that airlines airlines can be more flexible.

Lê Hồng Hà, chief executive of Vietnam Airlines, said the easing of the air ticket cap would reflect competition in the airline market. This would help airlines collect surcharges from customers who could afford it and would be an opportunity for carriers to widen the price fluctuation range.

Bùi Doãn Nề, vice president of the Việt Nam Aviation Business Association, said the high fuel prices were a real challenge, as the national airlines had just gone through more than two years of difficulties due to the pandemic and were not s were not yet delivered.

It was reported to the conference that during the first half of the year, the monthly number of international air passengers increased from 103,500 in January to 127,000 in February, 224,600 in March and 445,700 in April, 650 000 in May and about 826,000 in June.

By the end of June, more than 30 foreign and four Vietnamese airlines were operating 96 international routes between Vietnam and 21 countries and territories. Vietnamese carriers used 68 international routes to 16 countries and regions.

In the domestic market, six Vietnamese carriers operated 55 to 60 routes connecting Hanoi, Danang and HCM City to 19 local airports. The lifting of pandemic-related restrictions, along with booming demand, led to a rapid recovery in domestic air travel, with the number of domestic passengers increasing by 10-15% each month in the second quarter.

The number of air passengers passing through Vietnamese airports is expected to reach 70 to 80 million this year, including 8 to 10 million international travelers.

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