Covid-19 to cost Vietnamese airlines US$1.3 billion in revenue

Vietnamese airlines estimated the suspension of flight routes due to the Covid-19 pandemic would lead to potential losses of over VND30 trillion (US$1.3 billion) in revenue, according to the Ministry of Transport (MoT).

Illustrative photo.

The figure saw a sharp increase from the previous estimated losses of VND10 trillion (US$429.1 million) in early February and VND25 trillion (US$1.07 billion) in late February, according to an MoT report sent to the Ministry of Planning and Investment on the impacts of Covid-19 on the transportation sector.

To date, airlines operating in Vietnam have canceled all flights to and from China and South Korea; reduced 25% of the number of flights to Taiwan from 231 flights per week to 172, in which Vietnamese air carriers cut 34% of flights from 151 flights per week in late 2019 to 99.

For the Hong Kong route, airlines also reduced 69% of flights from 115 per week to 36, with domestic carriers canceling a whopping 92% of total flights, except for flag carrier Vietnam Airlines operating four flights per week from 47 at the end of 2019.

So far, there have been no changes to the airlines’ frequency to Japan's destinations, which stands at 160 flights per week. However, most airlines expected a high possibility that they would have to cut the number of flights to Japan in the coming time.

The Civil Aviation Authority of Vietnam (CAAV) said in the most optimistic scenario where the pandemic is contained in April, the number of air passengers would fall 15.4% year-on-year to 67 million. Of the figure, Vietnamese airlines are estimated to serve 12.7 million foreign passengers, down 28.3% year-on-year, and 35.3 million domestic passengers, down 5.5%.

In a second scenario with the pandemic being controlled before June, total passengers of the market is predicted at 61.2 million, down 22.6% year-on-year. Domestic airlines would suffer a decrease of 41.2% in foreign passengers to 10.4 million and 5.5% in the number of domestic passengers to around 35.3 million.

With such huge losses, the MoT proposed a number of supporting policies for Vietnamese airlines, including a 50% of reduction in take-off and landing charges, as well as air navigation service fees for domestic flights. The new policies are scheduled to become effective from March 1 to May 31.

The MoT also requested the government to waive import tariff and environmental protection tax for air fuel within three months. In case the waiver causes a significant decline to state budget revenue, the MoT expected a 50% reduction in import tariff and environmental protection tax for air fuel, while airlines are allowed to delay tax payment.