VietJet Air is confident of its financial strength and business model, even though second-quarter operating revenues more than halved amid the global Covid-19 outbreak.
The Hanoi-based low-cost carrier reported D1.12 trillion ($48 million) in operating losses for the April to June period, as air transport revenue declined 54% year-on-year to D1.97 trillion.
It said in a 2 August statement: “For the whole first six months of the year, the airline’s loss in air transportation business stands at D2.1 trillion, which is considered a modest number compared to the total loss of over US$84 billion for the global aviation industry.”
This appears to reference IATA’s latest estimate, published 9 June, that global airlines will post losses amounting to $84.3 billion in 2020 and $15.8 billion in 2021.
VietJet says it restarted all domestic flights after Vietnam resumed domestic operations in June, and expanded its domestic network to 52 routes by launching eight new routes to meet rising demand.
It also undertook cost-saving measures, such as stockpiling fuel in May when prices were low, and negotiating lower charges with suppliers, “for a reduction of 20% up to 45% of charge for airport handling, technical activities and other services”.
“With the cost optimisation advantages following the models of LCCs worldwide, VietJet has been proactively implementing cost-saving measures with an average cost drop of 55% due to operation capacity reduction of 30-35% and service cost decrease around 20-25%.”
It adds: “Thanks to its tech-based cost optimisation capacity, the airline has seen an effectiveness when following [the] LCC model, which has proven to be the right choice for the past economic crises.”
Other approaches to increase revenue and optimise operations include boosting cargo transport service since April. The carrier also increased the frequency of its charter service, and expanded its self-service set-up at Noi Bai International airport to optimise operating costs.
It is also expecting industry-wide government support, in response to proposals by local airlines. The carrier says that aviation support packages the government is considering include exemption of taxes, fees, charges for aviation services, as well as providing environmental tax exemptions for flight fuels, financial support, extension of payment terms, among others.
For the second quarter, VietJet reports a liquidity ratio of 1.4 and debt-to-equity ratio of 0.57, “which are among the lowest rates in the global aviation industry”. It says this allows it to proceed with its long-term financing plan that allows it to “enhance its internal resources for fighting the current pandemic”.
For this period, the LCC reported a D1.17 trillion financial revenue, which it says is the result of proactively seeking partners and implementing financial solutions such as asset transfer and financial investment to support its cash flow, built upon its solid financial base accumulated over past years.
“In conclusion, the airline’s results in air transportation business and financial activities are considered to be positive, making it [one of] the very few airlines in the world to cope well with the Covid-19 pandemic.”