Vietjet is using the strategies used by profitable low-cost carriers to increase sales and profitability.
Vietjet, a Vietnam-based ultra-low-cost airline, is making a significant impression on Australian visitors on a tight budget by providing round-trip tickets from Sydney and Melbourne to Ho Chi Minh City for as little as AU$200 ($132), taxes, and fees. While the revenue side of the balance sheet is unquestionably rising as a result, what is this doing for the airline’s bottom line?
Vietjet has disclosed its financial performance for the first quarter of this year (Q1/2023). Looking at those demonstrates that Vietnam’s top low-cost carrier is reaping the benefits of being aggressive in the industry by offering low prices and increasing capacity before demand. Hopefully, some of the other Asian airlines that are lagging behind will catch up and return the area to its pre-pandemic condition.
in excess of Q1 2022
Vietjet’s air transportation revenue in the first quarter was VND12,880 billion (about $553 million), and its after-tax profit was VND168 billion ($7.2 million), representing growth of 286% and 320%, respectively, over the same period last year. Consolidated sales for the business came in at VND12,898 billion, while the after-tax profit was only VND173 billion ($7.4 million).
Vietjet did a great job of following the low-cost carrier (LCC) model by generating 33% of its revenue from the sale of supplementary goods and services.The airline carried about 5.4 million passengers between January and March on 31,300 flights, an increase of 57% and 75% over the same time in 2022. Vietjet claimed to have an average passenger load factor of 85% and a technical reliability rate of 99.59%, albeit it is unclear exactly what those numbers mean.
It now operates a fleet of 77 Airbus aircraft, comprising five widebody A330-300s, 18 A320-200s, 36 A321-200s, and 18. To accommodate the ongoing development and growth on the international front, it plans to increase that to 87 aircraft this year, including boosting the number of A330s to nine. The airline expects to carry 25.7 million passengers on 139,513 flights this year, up from the 20.5 million passengers it carried on 116,260 flights in 2022.
The idea is to start international routes.
Vietjet’s foreign expansion, which now accounts for approximately 45% of passenger income and 30% of its overall flight and passenger numbers, is completely the opposite of that of many Asian carriers. The LCC added 10 new routes in Q1/2023, four domestic and six foreign, expanding its network to 55 domestic and 50 foreign lines.
Vietjet has added new destinations in high-performing markets like Japan, South Korea, and Thailand as well as new routes from Vietnam to India, Kazakhstan, and Australia. It controls about 40% of the domestic market in Vietnam and boosted frequency on the main trunk line connecting Ho Chi Minh City (SGN) and Hanoi in Q1.
Vietjet had total assets of more than VND69,200 billion ($2.96 billion) at the end of March, and its debt-to-equity ratio was 1.It has not always been easy getting here, as the airline concentrated on initiatives to boost productivity and control operating expenses, which it claims “contributed to the good performance in Q1/2023. Vietjet stated its goals for the remainder of 2023 include significant international market expansion, research and investment in high-potential routes, and the development of new ones.
