VietNamNet Bridge – If it opens direct air routes to the US by 2018 as planned, Vietnam Airlines may bear a loss of up to $50 million per annum, which means it would have to spend VND1 trillion a year in fixed costs on market creation.
In the five-year (2016-2020) business plan approved by the Ministry of Transport, Vietnam Airlines plans to open direct air routes to the US by the end of 2018.
However, the national flag air carrier may have to reconsider the plan.
The Civil Aviation Authority of Vietnam’s (CAAV) head Lai Xuan Thanh has said that the plan on assessing aviation safety surveillance capacity to be conducted by FAA (US Federal Aviation Administration) against CAAV (International Aviation Safety Assessment (IASA) Program) has been delayed.
As initially planned, the Vietnamese side will send a delegation of officials to the US to sign an agreement to conduct the technical review. However, FAA has recently requested the signing of the agreement by mail. After the signing, FAA would send specialists to Vietnam, and the technical review will finish in July at the earliest.
Only if CAAV is recognized as meeting level 1 (CAT 1) in aviation safety surveillance capability, will the US Department of Transport (DOT) consider Vietnam Airlines’ application for opening direct air routes to the US.
In November 2016, Vietnam Airlines applied to open direct air routes to DOT under the spirit of the Vietnam-US Air Transport Agreement signed in December 2003.
Though Vietnam Airlines still has not opened air routes to the US, it has earned money from the vast market since 2006 through code sharing, 7 flights a week to 25 cities in the US.
At present, there are still no direct flights between Vietnam and the US. The passengers have to have at least one stop with the flight time of 20-56 hours. In low season, the best air ticket is $400, while in high season, the best is no less than $1,000 (to the West Coast).
In 2016, the total market capacity, according to Vietnam Airlines, was less than 700,000 passengers while the growth rate was less than 9 percent per annum. The flights to Los Angeles and San Francisco accounted for 30 percent of market capacity.
Ten years ago, Vietnam Airlines planned to fly to the US with Boeing777-200, but now plans to use Boeing787-9 or Airbus350XWB. However, passengers will still have one technical stop, raising costs.
Under Vietnam Airlines’ plan, there would be one technical stop in Tokyo, where aircraft receive fuel to continue to fly to Los Angeles.