An unexpected return to profit has made Vietnam Airlines JSC the world’s best-performing airline this 12 months, avoiding the danger of bankruptcy as the corporate’s post-pandemic recovery finally gains momentum.
The state-owned carrier grew 179 percent in 2024, buoyed by a rebound in travel demand. That prompted the corporate to post a powerful first-quarter profit after greater than 4 years of losses.
It’s a remarkable turnaround for an airline that was recently on the point of insolvency and facing delisting from the Ho Chi Minh Stock Exchange. It’s now outperforming regional rivals like Singapore Airlines Ltd., which is up 7.8% this 12 months, and Air China Ltd., which is down 3.7%.
Vietnam Airlines expects to post “its highest-ever revenue and turnover profit” this 12 months, in keeping with a July 4 note from PYN Fund Management, one in all the corporate’s few institutional investors. Analyst Huyen Tran named the corporate a PYN Elite Stock of the Month for June, predicting growth in passenger numbers and revenue this 12 months.
Southeast Asian airlines are seeing a surge in demand as key travel markets slowly return. Visitors from China, Vietnam’s biggest source of tourists before the pandemic, returned in the primary six months of this 12 months, greater than tripling from a 12 months earlier. As the biggest local carrier serving the mainland, Vietnam Airlines is poised to learn.
The company stays wary of challenges to its business: In an announcement last month, Vietnam Airlines CEO Dang Ngoc Hoa cited “macroeconomic uncertainties” facing the industry, adding that its “primary focus” was to limit losses while balancing revenue and expenses.
Still, the airline has ambitions to expand this 12 months, adding routes to Southeast Asia and Europe. It can be adjusting flight frequencies and increasing capability on key routes to “capitalize on demand.”
Vietnam has big plans for long-term growth in its tourism sector. It has been singled out as one in all the important thing sectors to drive an economy that’s heading in the right direction to grow 6 percent this 12 months and 6.5 percent in 2025, in keeping with a study by Bloomberg.
“Vietnam’s ambitions to increase its popularity with international travelers could prove to be a key growth driver for local carriers such as VietJet and Vietnam Airlines,” Bloomberg Intelligence analysts Tim Bacchus and Eric Zhu said.
The goal of reaching 70 million international arrivals by 2045 “could make the country the second-largest tourist destination in Southeast Asia after Thailand,” they said.
The domestic aviation market can be seeing significant expansion, with passenger numbers set to rise 15 percent this 12 months compared with 2023, in keeping with data from the Civil Aviation Authority of Vietnam. Domestic cargo trade rose 8.5 percent from a 12 months ago.
Despite its recent rally, the airline stays a relative outlier in the sphere with a market value of VND76 trillion (US$3 billion). That makes it about half the scale of Australia’s Qantas Airways Ltd. and a fifth the scale of Singapore Airlines.
In what could be a pointy reversal of fortunes, Vietnam Air is targeting a net profit of VND4.2 trillion this 12 months, in keeping with an announcement on the corporate’s website. That’s after posting a lack of VND5.6 trillion in 2023.
One potential obstacle to expansion is a shortage of planes. The country’s aviation agency has encouraged airlines to lease more planes to satisfy rising demand after many planes were grounded as a result of engine retirements.
Other challenges may arise as well.
Ho Chi Minh City Securities analyst Che Thi Mai Trang called for the airline to be sold on the downgrade, saying the share price “looks overvalued.” The brokerage also lowered its earnings estimates “as domestic demand was weaker than our expectations.”
The carrier, whose shares can only be traded in afternoon sessions since it did not report its earnings on time, must still implement planned restructuring and refinancing measures.
Last month, the National Assembly approved an extension to repay a $4 trillion state-guaranteed loan, an indication of support from the federal government, which controls an 86 percent stake within the carrier.
The airline has described 2024 as a 12 months of overcoming challenges and rebuilding. The goal now, it says, is to “lay the foundations for sustainable growth.”
