Vietnam aviation to strongly recover from 2022F onwards

Vietnam aviation sector is expected to strongly recover from 2022F onwards. Photo: Vietnam Airlines

Vietnam Airlines operates direct flights to US

Faster-than-expected vaccination rollout

Currently, the biggest vaccination campaign in global history is underway. By December 2, 2021, more than 4.23 billion people worldwide have received a dose of a Covid-19 vaccine, equal to about 54 percent of the world population, of which 42.6 percent are fully vaccinated. However, the distribution has been lopsided. Countries and regions with higher income are getting vaccines faster than those with the lower one.

By December 2, 2021, 73.1% of the Vietnamese population have been administered at least one dose, of which 52.3% of the population have been fully vaccinated. The government targeted to receive 150 million doses by 2021 to fully vaccinate 75% of the population and achieve herd immunity.

Although the goal of achieving herd immunity in 2021 is hard to reach, VNDirect has seen a huge improvement in the vaccination rate since the beginning of Oct-21 compared to the previous period. From the beginning of Oct-21 until now, Vietnam’s vaccination rate achieved 1,144,006 doses/day, which doubled the rate in the July-Sep period. Assuming a vaccination rate of 1,000,000 doses/day from now on as the vaccine supply is improving, VNDirect expects 58.5%/80% of the Vietnam population will be fully vaccinated by 4Q21/1Q22, thereby, the goal of achieving herd immunity may be reached in 1Q22. High vaccination coverage in big cities with key domestic air traffic routes such as Hanoi and Ho Chi Minh city is a supportive factor for the return of the domestic flights in 4Q21.

IATA travel pass to play a crucial role

IATA Travel Pass is a mobile application developed by the International Air Transport Association (IATA) that helps travelers to store and manage their verified certifications for COVID-19 tests or COVID-19 vaccines. This will be important for governments that are likely to require either verified testing or vaccination proof as a condition of international travel during and after the COVID-19 pandemic. The IATA Travel Pass will be more secure and efficient than paper processes used to manage health requirements given the potentially enormous scale of testing or vaccine verifications that will need to be securely managed.

Currently, Singapore, Panama, Qatar, and Saudi Arabia have already joined the IATA’s digital Covid-19 passport program. In addition, almost 60 airlines have announced to trial the application including HVN, VJC and Bamboo Airways. Vietnam government is considering joining the digital Covid-19 passport program, thereby supporting the reopening of the international sky and resumption of international flights.

Reopening domestic and international flights

With the improving vaccination coverage, in mid-Sep-21, the Ministry of Transportation (MOT) has submitted the plan to resume domestic air traffic to the government with four specific stages. In the plan, the aircrew and the passengers are required to be fully vaccinated after 14 days since the day of injection and have a valid certificate of negative test results for Covid-19. Currently, Vietnam aviation is in phase 3 of the plan in which the frequency on each route for each airline does not exceed 30% of the average of the first 10 days of Apr-21 for that airline. Following the plan, Vietnam aviation will enter phase 4 in Dec-21 when the industry will be back to normal operations. With the improving vaccination rate of Vietnam and the government’s particular plan of resuming domestic air traffic, VNDirect believes Vietnam domestic aviation may come back to the pre-pandemic level in Dec-21.

To restart the international air traffic, the government has agreed on a pilot plan to welcome foreign tourists with vaccine passports to Phu Quoc, Ha Long, Hoi An, Nha Trang… when these cities achieve sufficient vaccine coverage. With “Phuket Sandbox” successfully resuming Thailand’s tourism and international air traffic, VNDirect believes this pilot program of the Vietnam government will be the first step in the recovery of Vietnam’s international air traffic as well as Vietnam’s tourism. Following the plan, Vietnam's international air traffic may come back to normal operations since 3Q22.

A strong recovery from 2022F onwards

With particular plans in resuming the domestic and international air traffic, together with recent positive signs in controlling the pandemic and improving vaccination coverage nationwide, VNDirect expected Vietnam domestic and international air traffic would gradually recover from 4Q21/1Q22, respectively. Due to the severe effects of the 4th pandemic outbreak, Vietnam's total domestic pax may drop 43.9% YoY and total international pax may drop 85.7% YoY in FY21F.

Aviation sector: Sunrise on the horizon 

Following the momentum from 4Q21, VNDirect expected Vietnam total pax to strongly recover in the medium-term, in which it expects Vietnam domestic pax to fully recover to pre-pandemic levels in FY22F (111.2% of FY19 base) and may reach 139.7% of FY19 base in FY25F.

Besides, this stock company expected Vietnam international pax to fully recover to pre-pandemic levels in FY24F (109.2% of FY19 base) and may reach 126.8% of FY19 base in FY25F. The vaccine passport holds the key to the safe restart of international aviation and facilitates smooth travel for passengers in a verifiable manner while ensuring government entry requirements for Covid-19 testing or vaccination are met, along with high vaccination coverage in Vietnam’s key international traffic markets.