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Vietnam Airlines Plans Launch of Flights to the U.S.
On Wednesday, Vietnam Airlines’ Board of Directors approved a plan to initiate direct services to the United States. Under the plan, the Vietnamese-flag carrier will commence flights in two phases.
Launching Flights to the United States
Firstly, Vietnam Airlines will apply to the United States Department of Transportation for further repatriation flights, which occurred on Monday. It previously operated twelve repatriation flights at the beginning of the pandemic, repatriating Vietnamese and U.S. citizens from and to San Francisco, Washington D.C. and Houston.
When the airline receives government approval, Vietnam Airlines plans to start weekly flights from Ho Chi Minh City, Vietnam to San Francisco. Weeks earlier, the flag-carrier had posted a schedule of the route, though it is unknown whether this is the final schedule. Under the proposed schedule, flights depart Ho Chi Minh City at 7:25 P.M. and land at San Francisco at 7:30 P.M. On the way back, the flight departs San Francisco at 10 P.M., stops in Anchorage, Alaska, before landing at Ho Chi Minh City at 6:40 A.M.
Initially, the route will operate once a week, increasing to three times a week depending on demand. While scheduled as an A350-900, vnexpress.net reports that the flight will be flown by a Boeing 787 Dreamliner. If true, Vietnam’s Airlines A350-900 and B787-9 should provide enough range for nonstop flights. In the past, Vietnam Airlines had used the B787-10 on flights between San Francisco and Hanoi, which required a stop in Anchorage.
These flights will mainly serve Vietnamese citizens who want to return home, as entry to Vietnam is barred for everyone, except for essential business or government travel. Also, it will serve essential travel needs between the two countries like diplomats, businessmen, foreign students and relatives returning to the U.S.
The “Phase 1” of repatriation flights will see little to no competition, as Vietnam Airlines will hold a sole monopoly for flights from the United States to Vietnam, allowing it to command higher fares. From Vietnam to the United States, the airline will face less competition than normal pre-COVID-19 conditions, especially due to a lack of Chinese carrier presence.
For the reasoning behind the move, Vietnam Airlines stated that a sale and leaseback of its excess long-haul aircraft faced many difficulties, which caused it to use its excess long-haul aircraft on launching flights to the United States. The airline hopes it can generate extra revenue if it launches flights to the United States.
Furthermore, these flights will be used as data to assess the market and prepare facilities for further launch for their second phase of operations to the United States. In their second phase, Vietnam Airlines plans permanent commercial operations for the United States, pending an evaluation of the recovery of market conditions in 2022. If so, the airline would have the option of expanding its offering to other U.S. cities like Los Angeles, home to one of the largest Vietnamese diasporas in the United States.
In its foreign air carrier permit from May 2019, Vietnam Airlines has rights to fly to Seattle, Los Angeles, San Francisco, New York and Dallas with possible intermediate stops in Taipei, Taiwan, Osaka, Japan and Nagoya, Japan. Additionally, the carrier can codeshare to 25 points in the United States with its partner Delta Airlines. If Vietnam Airlines chooses to fly to Los Angeles, it can feed into Delta’s route network to large Vietnamese diasporas like the Washington D.C. area, Houston area, etc.
With flights to the United States, Vietnam Airlines will face profitability issues due to the low-yielding nature of the market from high competition pre-COVID. In a 2019 filing, Vietnam Airlines posted that it expected first-year losses of $54 million on a hypothetical Ho Chi Minh City to Los Angeles route. Meanwhile, in an interview from 2018, Vietnam Airlines’ CEO Doung Tri Thanh expressed, “Vietnam Airlines could face an average annual loss of $30 million in the first five years of operation if we open a direct route to the U.S.”
Ultimately since the airline is majority-owned by the government, flights will serve the government’s desire for growth. From a Reuters interview, “The philosophy of the company is to help the economy and try to be viable and profitable. But growing the economy is more of a mandate. You can see on most of the intercontinental routes we are not making money. But we are helping to get people in and out.”
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