Tan Son Nhat International Airport in HCM City. Rising numbers of air passengers are expected to boost air travel companies’ earnings in the remaining days of 2018. (Source: VNA)Hanoi (VNA) - A third drop in global crude prices, plus an increasingnumber of air passengers, is expected to boost the performance of the twobiggest airlines Vietnam Airlines and Vietjet.
Brent crude on November 26 gained nearly 2 percentto trade at near 60 USD a barrel, having lost nearly 30.5 percent from itsone-year high of 86.29 USD a barrel made on October 3.
US benchmark West Texas Intermediate (WTI) wasup 1.5 percent to 51.17 USD a barrel on November 26. It has shed 33 percentfrom its year-high of 76.41 USD a barrel early last month.
Oil prices had previously gained significantlyin the one and a half months to October on worries the US sanctions on Iranwould cause a shortage on the global market.
In fact, oil production has not declined at all.According to Reuters, the US, Russia and Saudi Arabia in October produced total33 million barrels per day – a record high – accounting for a third of globaloutput.
Fuel accounts for 30-40 percent of total costsfor aviation firms, thus, a sharp drop in oil prices would lead to lower fuelexpenses and boost airlines’ profit margins.
In the third quarter of 2018, when oil priceswere on the rise, Vietnamese aviation companies posted lower quarterly profitsdespite their revenues improving from a year earlier.
National flag carrier Vietnam Airlines (UPCoM:HVN) recorded its margin profit fell to 12.2 percent from 18.8 percent.
Its post-tax profit dropped 68 percentyear-on-year to 458 billion VND (20.3 million USD) in the last quarter. Afternine months, Vietnam Airlines’ post-tax profit lost 13 percent year-on-year to 1.71trillion VND.
According to Vietnam Airlines, the company inthe past quarter suffered from higher fuel expenses (37.5 percent higher) andrising exchange rate (a 2 percent increase), while the performance of somemember companies was also affected by the increase of oil prices.
In a report, the Viet Capital SecuritiesCorporation (VCSC) said the decline of oil prices would benefit the earnings ofbudget carrier Vietjet (HoSE: VJC).
In the first nine months of the year, corebusiness revenue rose by half but post-tax profit added only 15.5 percentyear-on-year because of higher fuel expenses.
In addition to lower oil prices, which areexpected to boost aviation firms’ earnings in the fourth quarter, Vietjet’s useof new-generation airplanes would help the company save 16 percent of fuelconsumption.
Meanwhile, the increase of air passengers isexpected to help those firms achieve higher earnings from their corebusinesses.
Vietnam leads Asia in terms of air passengergrowth for the last five years with its annual growth rate estimated at 28.9 percent,twice that of the following country.
According to Phu Hung Securities JSC (PHS),services and additional product sales would temporarily help aviation firmsoffset their costs caused by purchasing oil at their high prices in October.
PHS forecasts that Vietnam Airlines would keepits passenger growth rate at 12 percent, level with the growth of the wholesector, and increase sales of additional products and services to supportbusiness performance.
Meanwhile, Vietjet’s earnings are expected togrow after the company launched new routes to Japan, the Republic of Korea andTaiwan to meet the travel demand of Vietnamese people.
According to the Airports Corporation of Vietnam(ACV), the number of air travellers in the first half of 2018 rose 14 percentyear on year to over 50 million and is expected to beat last full-year’s figureof more than 90 million.-VNS/VNA
VNA
