Vietnam Airlines' Strategic Vision

By October 2005, Vietnam Airlines had transported 5.1 million passengers, up by 19 per cent against that of the same period of 2004. According to the corporation’s report, its business activities are optimistic and may exceed its yearly plan for 2005 when Christmas and the traditional Tet (Lunar New Year) holidays arrive.

 

The number of passengers transported by Vietnam Airlines saw a high increase due to more and more foreign guests arriving in Vietnam and the good development of the local market. Statistics of the Vietnam National Administration of Tourism show that the number of foreign visitors to Vietnam, estimated at three million, in ten months of 2005 increased by 20.3 per cent over one year ago. Vietnam Airlines announced an increase of 20 per cent of its transportation in the local market in the first three quarters of 2005.

 

However, bird flu has reappeared in Asia and may produce some negative effects to the corporation’s growth. “If the epidemic breaks out and spreads widely, it will cost Vietnam Airlines a loss of around US$10 million,” said an official from the corporation. In 2004, Vietnam Airlines suffered a loss of between US$3 million and 5 million because of the outbreak of bird flu. The severe acute respiratory syndrome (SARS) caused the corporation a loss of between US$30 million and 50 million. This year’s oil and petrol prices rose by 26.2 per cent in the world market. As a result, Vietnam Airlines’ input costs in the first nine months of 2005 increased by US$60 million.

 

The international aviation transportation and the regional markets are experiencing fierce competition in exploiting flight routes to Vietnam. With the appearance of low cost airlines, the price competition has become ever fiercer Inconvenient climatic conditions with natural disasters, the risk of an outbreak of bird flu and instability in the region and the world may produce negative effects on aviation activities.

 

Other difficulties include a shortage of investment capital to meet a huge development demand, and slow progress in getting a cence for a conversion into a holding company.

 

To overcome these difficulties, Vietnam Airlines has applied many flexible policies and approaches. Accordingly, the corporation has applied flexible fare prices, offering a 30 per cent discount for night flights and return fare passengers. Recently, to cope with bird flu, Vietnam Airlines has removed meals prepared with poultry meat and eggs from its menu and has refused to transport poultry and poultry-based products.

 

In order to build up its reputation in foreign countries, Vietnam Airlines has co-operated with tourism, trade and culture services to organise marketing activities in Germany, Japan and Australia. At the same time, the corporation is negotiating with the Connexion Company of the Boeing Group on providing Internet services during its flights.

 

The corporation’s efforts paid off as its business results in 2005 were optimistic. In the first nine months, Vietnam Airlines performed 36,000 flights safely with a seat occupancy rate of 69 per cent, earning US$1 billion in revenues. In 2005, Vietnam Airlines opened direct flights to Frankfurt (Germany) and Nagoya (Japan). With its existing 32 international flight routes, the two new routes have help the corporation increase the contribution of revenues from international flight routes to 44 per cent in 2005.

However, the biggest achievement of Vietnam Airlines has been its strategy on building a strong fleet and qualified staff members. Taking advantage of a fall of 30 per cent of plane lease and prices after the September 11, 2001 terrorist attack, Vietnam Airlines approved a bold plan on developing its fleet in the 2001-2010 period. Accordingly, in the first five months, the corporation bought three ATR 72, four Boeing 777 and five Airbus A321, which were valued at US$791 million. So far, Vietnam Airlines has 38 planes, of which 17 planes are owned by Vietnam Airlines and 21 planes are leased. The corporation is carrying out a project on buying four B 787 and 10 A321 planes.

 

Vietnam Airlines now employs 14,000 staff members with 270 engineers and 240 pilots, meeting 70 per cent of the demand on exploiting the corporation’s planes. Also, the corporation has 1,300 stewards and stewardesses. Vietnam Airlines’ qualified engineers help the corporation save tens of millions of US dollars from hiring foreign experts.             

Nguyen Xuan Hien, general director of Vietnam Airlines, said that to record such outstanding achievements, Vietnam Airlines had always pursued its renovation policies, perfecting its organisation and apparatus. The corporation’s target is to become a strong economic group in 2010. Hien said that with such firm development steps, Vietnam Airlines will certainly achieve its target.