Profit of 82.3 billion VND: Exposing the heavy failure of Vietnam Airlines

Commenting on Vietnam Airlines' business results for the first 6 months of the year, Dr. Tran Dinh Ba - Vietnam Economic Science Association - said: Although the announcement of a "huge" pre-tax profit of up to 82.3 billion VND, if "calmly" reviewed, this figure has exposed the failure of Vietnam Airlines... We would like to send readers the article expressing Dr. Tran Dinh Ba's opinion below:

In the first 6 months of the year, while many businesses are struggling with the "uninvited" 981 drilling rig, the news that Vietnam Airlines has made tens of billions of dong in profit is making many businesses and airlines "take off their hats" in admiration mixed with... jealousy!

Vietnam Airlines' first 6 months profit... 82.3 billion VND

Sharing widely with the media, Vietnam Airlines said: It was expected to lose 160 billion VND due to the serious decrease in flight frequency on the route to China, however, Vietnam Airlines' production and business results in the first 6 months of 2014 still earned a pre-tax profit of 82.3 billion VND.

Specifically, in the first 4 months of 2014, Vietnam Airlines' business results exceeded the set plan. However, since May 2014, China's illegal placement of the 981 oil rig has greatly affected Vietnam Airlines' operations on flights to Hong Kong, Taiwan and China.

However, on July 29, Vietnam Airlines officially announced its production and business results for the first 6 months of 2014. Notably, the total revenue of this Corporation is estimated at 27,945.6 billion VND, of which Vietnam Airlines' revenue is estimated at 27,752.3 billion VND, reaching 48.5% of the yearly plan. The Corporation's pre-tax profit is expected to reach 100 billion VND, of which Vietnam Airlines alone is estimated at 82.3 billion VND.

Vietnam Airlines said it had carried out 62,088 safe flights, transporting over 8,035 thousand passengers, up 8.5% over the same period and up 0.5% over the 6-month plan. Of which, international transport reached 3,080 thousand passengers, up 10% over the same period and domestic transport reached 4,954.6 thousand passengers, up 7.6% over the same period. The operational reliability coefficient reached 85.8%.

According to Vietnam Airlines, in less than 1 month (from May 15 to June 10), 42,391 booked seats were canceled on flights to/from China, Hong Kong and Taiwan. The total number of flights decreased compared to the plan by 168 flights. In addition, charter partners have proposed to cancel up to 463 flights from June until the end of the year's contract. Sales decreased by 9.46 million USD (equivalent to 203.39 billion VND).

In addition, due to the decline in seat utilization rates in the Thai, Japanese and Russian markets, Vietnam Airlines also suffered losses because Cambodia Angkor Air – a joint venture airline with Cambodia – had to shorten the lease contract and return an aircraft early… but Vietnam Airlines did a miracle: Turning the “impossible” into possible!

The question is why despite all the difficulties, Vietnam Airlines still makes huge profits? What “miracle” has helped Vietnam Airlines?

Regarding this issue, Dr. Tran Dinh Ba - Vietnam Economic Science Association explained that Vietnam Airlines made huge profits by "picking the pockets" of state officials and people on "one-stop" flights from Ho Chi Minh City to Dong Hoi, Phu Yen, Pleiku, Dung Quat, Thanh Hoa... as reported by the press.

Specifically, on the "one-stop" route from Ho Chi Minh City to Con Dao, only 230km away, the ticket price is up to 1.7 million VND, more expensive than going to Hanoi. Tickets from Ho Chi Minh City to Phu Yen, Pleiku, Chu Lai, Dong Hoi, Thanh Hoa... are 1.5-3 times more expensive than other airlines. Ticket prices from Hanoi to Phu Quoc are up to 3-5 million VND, so for many consecutive years, the state-owned Vietnam Airlines has always made huge profits. Although passengers are upset, they "have to rely on the boat to cross the river", reassuring themselves that "what goes through the sieve and into the basket", the money still flows according to the "law of conservation" from the pockets of passengers through the state-owned Vietnam Airlines, all in Vietnam to build the country.

The most admirable thing is that Vietnam Airlines has the courage to live above public opinion despite being opposed to its sky-high ticket prices. This miracle can only be achieved by a “giant” in the aviation industry like Vietnam Airlines under the protection of the Civil Aviation Authority of Vietnam, while other airlines “cannot even dream”…

Vietnam Airlines' huge profit is only... equal to the money "a hunchback woman spends on vegetables"

At first hearing the "huge" profits of billions of Vietnam Airlines, many people think that if this rate of annual accumulation continues, it will not be long before Vietnam Airlines will take over all airlines in the world such as Air Cargo, Carriers, Ameristar Air Cargo, Ameristar Jet Charter... not just JPA, VJA.

However, looking closely, the denomination of Vietnam Airlines' profitable billions is VND, not US dollars, Singapore dollars or Australian dollars... Vietnam Airlines has audited its IPO with a positive result of 55,000 billion VND in assets. It is expected that the first batch of "stock products" will be sold on July 27, 2014.

Many stock investors are focusing on Vietnam Airlines, but until now, July 27 has passed for more than 2 weeks and there is still no news of the heavyweight shares of Vietnam Airlines.

Consecutive years have reported profits, in 2012 alone the profit was a whopping 533 billion VND (VND). In the last 6 months, the profit was 82.3 billion. Assuming the whole year profit was 161 billion VND to evaluate business efficiency: Profit of 533/55,000 billion VND is only 0.009, rounded to 0.01, which is nearly 1% per year. Profit in 2014 is assumed to be 161 billion, then 161/55,000 is 0.0029, rounded to 0.6%, not quite 1%, far lower than the lowest bank deposit interest rate of 5% for short term of 6 months.

Moreover, 165 billion VND is only equivalent to 8 million USD, equivalent to the price of 4 Rolls-Royce Phantom Dragons or 300 4-seat taxis. If you save up to buy a mid-range Airbus A330 worth 175 million USD, you will have to wait 23 years!

If that profit is divided among 35,000 employees of Vietnam Airlines, the bonus for each person during Tet is 4.7 million VND, only equal to a pair of round-trip air tickets from Ho Chi Minh City to Dong Hoi!

The "big guy" Vietnam Airlines with a value of 2.5 billion USD counts "huge profits" in billions of VND, converted into currency units of only a single number of "million dollars", only enough for "hunchback women to go to the market to buy vegetables", exposing the severe failure in the production and business of this airline.

If the Minister of Transport's directive to reduce airfares is properly implemented, who knows how bleak the business performance picture of Vietnam Airlines will be?

According to GDVN