Urgent support for aviation industry due to East Sea tensions

Passenger traffic between Vietnam and China has dropped sharply, airlines have cut flights and lost thousands of billions of dong in revenue since China illegally placed the oil rig.

Deputy Minister Pham Quy Tieu, on behalf of the Ministry of Transport, has just sent a report to the Prime Minister on policies to support Vietnamese airlines during the period of negative impacts due to the situation in the East Sea. Accordingly, airlines, especially Vietnam Airlines, will receive many incentives such as increasing the limit on the number of flights per hour, reducing airport fees, etc.

Vietnam Airlines is allowed to increase flight limits and flights after heavy losses due to the East Sea incident.

The Ministry of Transport’s report also detailed the damage airlines have suffered in recent times. After riots took advantage of protests over China’s illegal placement of an oil rig in Vietnam’s exclusive economic zone in May, the Chinese, Taiwanese and Hong Kong governments issued warnings to restrict travel to Vietnam. Chinese and Vietnamese tourists canceled all travel plans between the two countries this summer.

These events have greatly affected the aviation market, with Vietnam Airlines being the most affected domestically. The airline has canceled 13 flights to 12 destinations in China from mid-May to the end of October. Currently, the airline only maintains flights to Beijing, Shanghai, and Guangzhou.

In total, as of last October, 1,476 two-way flights were canceled between Vietnam and China, Hong Kong, Taiwan, and Thailand, causing a loss of revenue for the airline of over VND2,880 billion.

In addition to Vietnam Airlines, Jetstar Pacific also suffered losses due to the reduction in the scale of its flights to Macao, forcing the airline to cancel a series of flights in May and June. K6 - a joint venture established by Vietnam Airlines in Cambodia - was also affected, having to shorten its lease contract and return an aircraft to Vietnam Airlines early.

In addition to the above-mentioned airlines, the Port Corporation and the Air Traffic Management Corporation suffered losses in toll revenue due to foreign airlines cancelling flights to Vietnam. Accordingly, China Southern Airlines, Spring Airlines, Hong Kong Airlines and Uni Air cancelled more than 230 round-trip flights to Vietnam as of October 2014. The number of flights operated between Vietnam and China, Taiwan and Hong Kong decreased by 34% in the flight schedule this past summer.

To minimize the above losses, the airlines themselves must find ways to cut internal costs and increase revenue. In particular, Vietnam Airlines said it must reduce operating costs, reduce salaries, streamline personnel in unnecessary positions, reduce aircraft rental costs, advertising, etc. In addition, the airline increases revenue by increasing frequencies on some routes in Southeast Asia, Northeast Asia and domestically. In order to ensure the operation of the A321 fleet, which is being affected by markets related to Chinese, Taiwanese and Hong Kong customers, the airline will shift to other routes that are not affected.

The Ministry of Transport has allowed Vietnam Airlines to increase flights departing from Ho Chi Minh City. Because the current limit of flights operating in an hour (30 flights) is full, the airline has been allowed to increase the limit to 32 flights. Following the Ministry's direction, the Civil Aviation Authority also approved the airline to increase flights and adjust flight times appropriately on many routes from Hanoi and Ho Chi Minh City.

In addition, in order to reduce dependence on the Chinese market in anticipation of prolonged tensions, the Ministry of Transport has directed Vietnam Airlines to continue developing transcontinental routes. The airline is required to develop a plan to operate direct flights to India from the 2015 Summer Flight Schedule, allowing the application of a service discount policy for this route for a period of 3 years.

In addition to the preferential policy for Vietnam Airlines, the other two airlines, Vietjet Air and Jetstar Pacific, will enjoy a common 25% discount policy on the service fees for departure and arrival flights, take-off and landing fees at airports and security screening fees for goods and baggage from May 1, 2014 until the end of the year. The Ministry is also studying to direct the General Port Corporation not to increase rental prices and service prices at airports for airlines this year.

In addition to the preferential policies that the Ministry can decide on, the Ministry of Transport also sent a proposal to the Prime Minister to direct the Ministry of Finance to consider reducing the import tax on fuel for aircraft in 2014 from 7% to 3%. In addition, the Ministry also proposed to relax the entry visa policy for some important passenger markets such as the UK, France, Germany, Australia and India.

According to VNexpress