How did VietJet Air achieve profitability under the pandemic?

Report by : Gan Yung Chyan, KUCINTA SETIA

In 2020, 99% of airlines have suffered a devastating blow, but Vietnam's low-cost airline VietJet AIr has still achieved profitability in 2020. VietJet Air announced its latest financial results on 31 January 2021. It has achieved an after-tax profit of 70 billion VND, equivalent to 3 million U.S. dollars. Let's take a look at how this airline achieved profitability during the pandemic.

VietJet Air said that its ancillary operating income and cargo business are two major tools to offset the decline in air travel revenue, of which ancillary operating income accounts for nearly half of its total revenue.

The cargo business has also contributed to the success of VietJet Air. In fact, the airline's cargo volume increased by 16% year-on-year in 2020. In the last quarter alone, freight revenue increased by 75% compared to the same period in 2019.

Since it does not have its own dedicated cargo aircraft, VietJet Air has joined the wave of passenger conversions of other airlines, using the main cabin of the passenger aircraft to accommodate cargo. Passenger aircraft modification is not the only adjustment measure of VietJet Air. VietJet Air has also signed transit agreements with other airlines to enable it to expand its cargo network to Europe and the United States.

Other initiatives that have contributed to the airline's success include the opening of a special ground handling center at Noi Bai Airport in Hanoi. The airline stated that this "helps the airline better manage operating costs while improving brand recognition and service quality."

In addition, VietJet Air also cut other operating expenses, reducing fleet operating costs and daily operating costs by 10%. In May last year, the airline also "successfully hedged" jet fuel, saving 25% of its cost compared to market value.

Another factor is that Vietnam has relatively few confirmed covid cases and domestic air travel has not been curbed. VietJet Air has now restored its entire domestic aviation network with more than 47 routes.

Of course, the success of VietJet Air cannot do without government support, including tax incentives, reduced landing/take-off fees, ground handling fees and air control fees.

Despite the government's help, VietJet Air’s performance last year was impressive in all aspects.