HIGHLIGHTS
- Vietnam Airlines estimates that the price of Jet A1 fuel would climb to more than $160 per barrel, with the price potentially reaching $200 per barrel.
- Vietjet Air said that the cost of flying fuel accounted for almost 30% of the company’s overall revenue.
- Airlines might boost airfares to compensate for the cost of flight materials.
- In addition, in the face of fluctuating fuel costs, airlines might use fuel surcharges on domestic routes to give themselves more flexibility in modifying prices based on market supply and demand.
- Many new airlines have raced to enter the aviation sector in recent years, making the market extremely competitive. Bamboo Airways, Vietravel Airlines, and Sun Air are some of the names that come up.
FULL ARTICLE
The risk of substantial losses is increased by a sudden increase in the price of fuel
When the Russian-Ukrainian war broke out during the post-Covid-19 recovery period, the world economy in general, and Vietnam in particular, were faced with a fuel price shock. The price of fuel continues to rise and shows no signs of abating.
Vietnam has abandoned its “Zero Covid” strategy in preference of trying to live with the epidemic and opening up the worldwide market. Domestic and international flights have slowly restarted. As a result, Vietnam’s aviation industry is under a lot of pressure as it faces the problem of increasing flight fuel and recovering from Covid-19.
The price of oil surpassed $130 per barrel at the start of March 2022. Vietnam Airlines anticipates that the cost will rise by VND 5,700 billionat this price. Vietnam Airlines estimates that the price of Jet A1 fuel would climb to more than $ 160 per barrel, with the price potentially reaching $ 200 per barrel, especially in the current environment. If this occurs, Vietnam Airlines might face billions of dollars in losses by 2022.
Not only Vietnam Airlines, but also Vietjet Air, said that the cost of flying fuel accounted for almost 30% of the company’s overall revenue. Furthermore, rising fuel prices have had a significant impact on the profit margin of this business, as output fares will not be able to keep up with rising input prices.
Faced with rising flight fuel costs, Vietnam Airlines has suggested to the Ministry of Finance and the Prime Minister that all aviation fuel taxes be waived in 2022. Furthermore, in order to offset fuel costs and attract high-end consumers, the airline has suggested to the Ministry of Transport that airfares be raised.
Airlines might boost airfares to compensate for the cost of flight materials. In addition, in the face of fluctuating fuel costs, airlines might use fuel surcharges on domestic routes to give themselves more flexibility in modifying prices based on market supply and demand.
However, when it comes to increasing fares, airlines will be unable to do so because of the strong rivalry in the aviation business. Furthermore, the aviation business has just recovered from the epidemic, so a fare increase that is too high may jeopardize the entire industry’s recovery.
The “new fighters” appeared in the “sky” arena
Many new airlines have raced to enter the aviation sector in recent years, making the market extremely competitive. Bamboo Airways, Vietravel Airlines, and Sun Air are some of the names that come up.
Bamboo Airways is the first, having joined the market in 2018. In 2022, with the aviation industry on the recovery, Bamboo Airways aims to operate 80 domestic routes, 40 foreign routes, and have 30% of the domestic aviation market share.
Vietravel Airlines, a new airline in the aviation business, is scheduled to grow the number of aircraft from three to six. In addition, the airline has actively created a number of new flights to popular tourist destinations in Vietnam.
Sun Air, a subsidiary of SunGroup, entered the Vietnamese aviation sector on March 2. It is the world’s first joint luxury airline, providing individualized and specialized luxury flight services. Sun Air also wants to become a global private jet service by using the world’s fastest aircraft to win the air speed competition and cut the maximum time per leg.
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