Him Lam - the new owner of Bamboo Airways - aims to build an ecosystem of many subsidiaries in catering, fuel, and engineering and requires the executive board to "make a profit".
After much skepticism, Bamboo Airways took off its first commercial flight in early 2019. With the ambition of a 5-star airline of former FLC Chairman Trinh Van Quyet, the airline quickly expanded its fleet, route network, and accompanying services. At the end of its first year of operation, Bamboo Airways became the first domestic private airline to operate wide-body aircraft and later pioneered the introduction of regional jet aircraft to Vietnam for niche routes.
By the end of 2021 - the time before FLC's senior leaders were involved in legal trouble, with a fleet of nearly 30 aircraft, Bamboo Airways' flight network covered the domestic market with nearly 20% market share and a number of international routes.
Before the new investor was officially revealed, Bamboo Airways' business results were announced with an accumulated loss of more than VND 19,300 billion, up to the end of 2022, or 9 months after Mr. Quyet was arrested. If not counting the provision of nearly VND 11,000 billion recorded in last year's financial report, this airline's accumulated loss was over VND 8,000 billion, and in 2022 alone, the loss from business activities was about VND 4,800 billion.
"The past 5 years have been a journey of forming and shaping the company's brand. In the next 5 years, Bamboo Airways will develop in depth, professionally and more effectively," Mr. Nguyen Ngoc Trong, Standing Vice Chairman of the Board of Directors and also one of the people who planned the Bamboo Airways project with Mr. Quyet in the early days, shared at the shareholders' meeting on June 21.
At this meeting, Him Lam publicly announced that it is the new investor of Bamboo Airways after the airline completely separated from FLC. Mr. Duong Cong Minh's group is operating in many fields such as real estate, hotel services, golf courses...
Bamboo Airways CEO Nguyen Minh Hai said investors have asked him and the board of directors to "do it right, do it quickly, but make a profit." That is, the airline plans to reduce losses by 50% compared to last year and move towards break-even next year to make a profit by 2025.
To fulfill this wish of the new investor, Bamboo Airways prioritizes increasing production and business scale and reducing costs.
In 2022, Bamboo Airways' net revenue will increase 3.3 times, reaching over VND11,700 billion. However, Mr. Hai said that the airline has not yet found its break-even point. He explained that an airline can only break even when considering the efficiency per seat provided. Last year, Bamboo Airways' cost coefficient per seat provided (CASK) was 6.96 cents (down 30% compared to 2021), while its revenue coefficient per seat provided (RASK) increased by 20% to 5.25 cents. Therefore, in the coming time, Bamboo Airways' management board must do everything possible to increase the RASK index and reduce CASK.
To increase production scale and revenue, Bamboo Airways is also forced to add more aircraft, because Mr. Hai affirmed that with the current fleet of 30 aircraft, the airline will certainly still lose money. Accordingly, from now until 2026, the airline plans to add 8-10 aircraft each year. Along with that, the airline will also have to make efforts to increase the operating hours of aircraft, above the current average of 10 hours per aircraft per day.
Regarding costs, Bamboo Airways CEO informed that in the early stages of market penetration, low output means that the price level of some of the company's services is 20-30% higher than that of traditional airlines. However, Mr. Hai said that Bamboo Airways currently has output which will give it an advantage when negotiating price reductions.
At the same time, Bamboo Airways can also optimize costs by establishing subsidiaries such as cargo, engineering, ground services, catering, fuel and training. In fact, this is also the strategy that the two domestic aviation giants Vietnam Airlines and Vietjet have implemented.
According to Mr. Trong, Bamboo Airways' cargo company has been operating since January 1; other companies such as aircraft engineering are expected to start from September 1; the petroleum company will start from September with its first product at Con Dao airport; airline catering and ground services will be deployed from early next year. Recently, Him Lam Land has also become a major shareholder in Saigon Ground Services Company (SGN) - a unit with a large market share providing logistics services at Tan Son Nhat and several other airports.
When taking over Bamboo Airways, Mr. Duong Cong Minh wanted to develop it "into an Asian-scale airline". He invited Japanese experts to join Bamboo Airways. This was also the group that successfully restructured Japan Airlines - a bankrupt airline in the early 2010s. In the new term of Bamboo Airways' Board of Directors, former Japan Airlines Deputy General Director Oshima Hideki took on the role of chairman.
"We can do it ourselves but it will take more time. With experience, experts will help Bamboo Airways join aviation alliances and cooperate more conveniently with airlines around the world," said Mr. Nguyen Minh Hai.
Regarding the IPO plan, Bamboo Airways CEO said that the airline plans to list on the domestic stock market by the end of 2026 if it meets the prescribed conditions. Previously, the airline wanted to IPO in the US. The head of Bamboo Airways' executive board said that he did not consider IPO as a goal, but only as a means to help arrange and mobilize resources more easily. Bamboo Airways' goal is to build a good business of continental stature.
This airline will have to deal with many issues in the context of the unclear recovery of the aviation market and the general economic downturn. Quickly increasing the size of the fleet is not simple now because the world is lacking aircraft when the demand for travel has recovered since the end of last year, the price of renting aircraft is high. Mr. Hai also admitted that it is now difficult to rent aircraft at the same price as the airline's previous leadership.
In the aviation market, in addition to service quality and price, flight hours are also important factors that determine the number of passengers and revenue of a business. As a latecomer, Bamboo Airways is facing difficulties in being assigned flight slots (takeoffs/landings) both domestically and internationally.
The division of slots is based on historical factors, and it takes time for a new airline to get the appropriate slot. Mr. Hai gave an example, at Beijing airport (China), a new airline is assigned a night take-off slot. After 3 months, there will be a re-evaluation, if any airline does not operate well or leaves, the slot of the airline that comes later can take off 1 hour earlier. Thus, to change from night take-off to day take-off, a new airline may have to wait from one to two years.
In the domestic market, on the golden route Hanoi - Ho Chi Minh City, Mr. Hai informed that Vietnam Airlines has about 64% of the best flight hours, Bamboo Airways only owns over 10%. Therefore, he admitted that optimizing flight schedules is also a difficulty for the airline.
Anh Tu
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