Vietnamese airlines report Q3 loss

Vietnamese airlines like Vietjet Air, Vietnam Airlines, or Bamboo Airways continued to report losses in the third quarter of the year.

In Q3, Vietjet Air reported net revenue of VND11,600 billion ($466.61 million), up 652% year-on-year, while after-tax profit was VND42.5 billion ($1.71 million), down 40%.

The budget carrier, listed on the Ho Chi Minh Stock Exchange (HoSE) as VJC, said the main reason comes from the high cost of jet fuel averaging $130 per barrel, sometimes increasing to $160 compared to the average of $80 in 2019.

Similarly, the tourism market's strong recovery helped Vietnam Airlines (HoSE: HVN) expand its Q3 revenue by 350% to VND21,156 billion ($850.99 million).

Gross profit was VND165 billion ($6.64 million) and Q3 was the first quarter since the beginning of 2020 for this airline to record gross profit. However, excluding expenses, HVN still lost VND2,546 billion ($102.41 million), although the loss decreased by 28% compared to the same period last year.

The national carrier said the total cost of Q3 surged by 160%, equivalent to an increase of VND10,504 billion ($422.52 million) mainly due to the increase in fuel costs (average fuel price in Q3 up 1.8 times year-on-year) and financial costs (mainly interest expense, exchange rate difference loss).

According to the consolidated financial statement of parent company FLC Group, Bamboo Airways (BAV) recorded a cumulative loss of VND3,500 billion ($140.79 million) in the first nine months of the year. This figure is higher than the loss of nearly VND2,300 billion ($92.52 million) for the whole year of 2021 when the Covid-19 pandemic broke out.

Meanwhile, Vietravel Airlines (UPCOM: VTR), with Vietnam Travel and Marketing Transports JSC holding a 43.92% stake, recorded a loss of VND368.4 billion ($14.82 million) in the nine-month period.

In Q3, VTR recorded a net revenue of VND1,479 billion ($59.49 million), more than 25 times higher than the same period. However, deducting expenses, VTR achieved a net after-tax profit of nearly VND7 billion ($281,400), an improvement compared to a loss of VND192 billion ($7.72 million) in Q3/2021.

In 2023, international aviation is forecast to grow strongly as most countries have lifted restrictions on visitors, hoped to support international travel demand.

In Q3, international arrivals increased 35 times and recovered by 49.8% from before the pandemic. In the base scenario, leading broker VnDirect expects China to gradually lift travel restrictions from Q2/2023. The volume of international arrivals may recover to 84% in Q2/2023 and 100% in Q4/2023, helping international arrivals in 2023 increase by 195% year-on-year.

The broker says it highly appreciates the airline retail model thanks to its high barriers to entry and outstanding profit margins.

The company believes that profit growth from Q3/2022 - 2023 in most segments (ports, airlines, retail) is relatively solid due to the recovery of international visitors. The recent market correction has returned the prices of stocks in the industry close to the time of the Covid-19 outbreak (March 2020).

Therefore, VnDirect thinks this is the time to accumulate aviation stocks with attractive prices and solid profit growth.

However, it noted some industry risks like higher-than-expected fuel prices leading to higher operating costs for airlines, which can increase ticket prices and reduce demand for flights. Bilateral tourism between Vietnam and China will be difficult to recover due to the latter's zero-covid policy; a higher than expected U.S. dollar/Vietnamese dong exchange rate, and rising U.S. dollar interest rates that may affect the borrowing of capital for aviation infrastructure investment in U.S. dollars in the near future.

The country received 2.36 million international arrivals in the first 10 months of the year, 18.8 times year-on-year, but down 83.7% compared to the same period in pre-pandemic 2019.

The tourism's revenues in the period reached VND19,700 billion ($792 million), 3.9 times year-on-year.