On the morning of 9/3, the Civil Aviation Authority of Vietnam (CAAV) held a meeting with industry units to discuss solutions for coping with the impact of rising fuel prices.

According to Bui Minh Dang, Head of the Air Transport Department, CAAV, jet fuel prices for Jet A1 have tripled compared to before the conflict, due to the complex developments in the Middle East. This increase could raise airlines' operating costs by 60-70%. With fuel already representing the largest proportion of operating expenses, financial pressure on airlines is intensifying.

Beyond airlines, rising diesel prices are also increasing equipment operating costs at ports.

Furthermore, businesses face challenges in securing fuel supplies. Tran Minh Tuan, General Director of Vietnam Air Petrol Company Limited (Skypec), stated that the company currently imports 70-80% of its fuel supply primarily from Singapore, Thailand, and China. The remaining portion comes from two domestic refineries: Dung Quat and Nghi Son.

According to Tuan, Skypec has secured fuel supplies for airlines until 31/3 and has placed orders for April's demand. However, the ability to ensure supply in the subsequent period largely depends on the developments in the Middle East.

Skypec recommended that the CAAV advise domestic and international airlines to optimize their fuel usage plans and commit to relatively accurate consumption volumes for March through May. This would allow the company to proactively manage inventory and finances.

Aircraft at Dien Bien Airport. Photo: Ngoc Thanh

Similarly, Nguyen Van Hoc, General Director of Petrolimex Aviation Fuel Joint Stock Company, stated that the company can secure fuel for airlines until the end of March. Supply for April remains uncertain, as some signed orders risk cancellation if relevant parties invoke force majeure clauses.

“We urge airlines to strictly adhere to signed contracts, allowing us to plan purchases and mitigate price risks,” Hoc said.

This company's representative also proposed that the CAAV report to the Government and the Ministry of Foreign Affairs to work with supplying nations. The goal is to support the execution of signed shipments and facilitate the return of fuel tankers to Vietnam, given the urgent domestic demand.

For their part, facing escalating cost pressures, airlines are implementing various fuel-saving measures. According to Nguyen Quang Trung, Deputy General Director of Vietnam Airlines, if fuel prices rise to approximately 200 USD/barrel, operating costs for airlines could double. In such a scenario, airlines would incur losses with every flight.

To address immediate challenges, Vietnam Airlines proposed an exemption from environmental protection tax on jet fuel. Additionally, the airline requested that the CAAV collaborate with international aviation authorities to implement flexible operating mechanisms, similar to those during the Covid-19 pandemic.

A representative from Airports Corporation of Vietnam (ACV) stated that it has instructed airports to review existing fuel resources and increase reserves to ensure uninterrupted airport operations.

At the meeting, CAAV Director Uong Viet Dung noted that the current situation poses significant challenges for the industry. He emphasized the need for units to unite in their resolve to find appropriate solutions.

Regarding domestic fuel suppliers, Dung urged them to strive to maintain production and business plans, ensuring supply for aviation operations. Airlines should optimize costs and develop solutions to sustain their route networks and flight schedules. They should also explore opening new routes or increasing flight frequencies to potential markets such as the Americas, Africa, Australia, Eastern Europe, India, Japan, and South Korea, while ensuring service quality commensurate with cost reductions.

Concerning policy recommendations, the CAAV will propose that the Ministry of Construction report to the Government to consider suitable support mechanisms. It will also recommend that the State Bank of Vietnam loosen credit limits to support fuel importers and airlines, and that the Ministry of Industry and Trade promote expanding market supply.

The CAAV also recommended that the Ministry of Finance continue studying relevant tax and fee support mechanisms. It further suggested that the Ministry of Foreign Affairs assist in working with international agencies and authorities to facilitate fuel suppliers' access to goods.

Doan Loan