…is the big worry about the market decline not only of fledgling air carriers like Air Mekong or Vietjet Air, but also of the national air flag carrier Vietnam Airlines (VNA), which is holding more than 70% of the market share.
Big sale promotion campaigns launched
Over the last three years, passengers have been regularly enjoying big airfare discounts offered VNA.
The national air carrier has reported that hundreds of thousands of air tickets with the price discounts of up to 50% are sold every year.
The big sales promotion campaigns run by VNA have helped stimulate the demand, but they have put big difficulties for other air carriers, which also had to follow the move by lowering their airfares, and for VNA itself.
Indochina Airlines, which had to stop operation just after one year of providing commercial flights, once complained that it couldn’t sell tickets at higher prices to make profit, because of the cutthroat competition in the aviation market.
VNA is now holding more than 70% of the domestic market share, considered the “eldest brother” among the air carriers. This explains why VNA announces air discount campaigns; other airlines also have to launch sales promotion programs.
Jetstar Pacific, known as a budget airline, which always tries to cut down expenses, also admitted that it couldn’t bear the air ticket price reductions in a large scale offered by the eldest brother.
Since the airline sold tickets at low prices, the turnover wasn’t high enough to cover expenses. This, plus the management problems, both have made the airline take loss continuously in the last few years. Meanwhile, the air carrier has anticipated that the loss wouldn’t be less than US$9 million in 2012.
Vietjet Air, a new comer on the market, also had to attract more passengers by launching a series of sales promotion campaigns, offering the air tickets with surprisingly low prices of VND19,000 or VND350,000 – VND900,000 for domestic flights.
Right after Vietjet Air raised the flight frequency, VNA also launched a sales promotion campaign for the autumn season, under which 300,000 air tickets were sold at the prices of VND550,000 – VND950,000 (one way), not including taxes and fees.
However, in fact, passengers can still fly at “reasonable costs,” even if they don’t book tickets in August. Obtaining the tickets for the Hanoi-Ho Chi Minh City flights at just VND1.2 million, including taxes and fees is within reach of passengers.
Especially, passengers can fly with the national flag air carrier Vietnam Airlines instead of a budget airline, with just VND1.3-1.5 million on the same route.
Air Mekong and Jetstar Pacific have not run sales promotion campaigns noisily, but they have adjusted the airfares to make the air tickets reasonably cheap to passengers, with the gaps between the airlines’ ticket prices and VNA’ lowest airfare rates hovering around VND300,000 – VND600,000.
Continued loss anticipated
Explaining the currently applied flexible airfare pricing policy, an executive of VNA said the competition has become fiercer and stiffer on both the international and domestic routes.
The executive said that its international air routes have been influenced by the global political and economic changes and the appearance of new competitors. Therefore, instead of expecting high profits from international flights to offset the loss in domestic flights, VNA needs to improve the exploitation efficiency of the flights on domestic routes.
In a recent report, VNA said its domestic transport output would be 7.5% lower than the targeted output set up in the yearly business plan.
With Vietjet Air’s more aircrafts put into operation and the market decline of 2.6% in the first six months of 2012, VNA’ number of passengers was 5.8 million only, just fulfilling 96% of the plan.
(Source: vietnamnet)
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