Vietnam Airlines bumps into stiff competition

Experienced pilots poached by other carriers have posed as a major challenges for Vietnam Airlines since the beginning of the year. The airline has been known to continuously call for help from the government to rectify this severe situation.

The competition in pilots has turned sour when many Vietnam Airlines pilots quitted their job for its rivals, citing the low remuneration package as the key issue for their leaving.

Data showed that market share of domestic passenger traffic for Vietnam Airlines has decreased for four consecutive years. From the 47.5 per cent reported in 2015, the domestic passenger traffic has felt to 39.7 per cent in 2018. For the international passenger traffic, the airline’s market share has also slumped from 39.4 per cent in 2015 to 25.5 per cent last year.

Vietnam Airlines set its target to regain its market share of 55 per cent in 2019, with the total passengers to reach 24.9 million, an up of 13.7 per cent on-year. Market experts have nevertheless shown their concerns over the target amid fierce completion from budget airlines.

VietCapital Securities (VCSC), in particular, projected a decline of 0.8 per cent in profit margin of passenger transport service in the period of 2019-2023. This will come as part of the attempt where Vietnam Airlines offers discounted airfares for its domestic and regional flights to compete with the emerging Bamboo Airways.

It is not only the falling profit margin that Vietnam Airlines will face but also the market segment that is going to be hard to maintain.

Bamboo Airways, in this case, has its plan to double its domestic routes by the end o 2019, to enhance its market share of domestic flights. 

VietJet Air, on the other hand, has focus on expanding its international routes to East Asia countries. In 2018, its international routes have soared to 66, accounting for two-thirds of its total routes available domestically and internationally.

Despite having to face many difficulties, Vietnam Airlines still owns its unique advantage in terms of being a full-serviced airline compared to other budget ones. Given its well-established infrastructure, the airline can tap into budget, mid-end and high-end customer segments at the same time to maximise its profit.

Vietnam Airlines, according to VCSC, will still benefit from its dominant market position in the most profitable domestic and international routes connecting Vietnam’s cities to financial centres in region.

Vietnam Airlines expects to promote its sale-and-lease-back transactions to offset the loss in the passenger profit margin.

In 2019, Vietnam Airlines will be welcoming 22 new aircrafts, including three Boeing 787-9, two Airbus A350-900 and 17 Airbus A321NEO, bolstering its fleet to a total of 98 by the year end.