AVIATION INDUSTRY REPORT, Q2/2018 - VIRAC€¦ · 1.3 Trade agreements 24 4.3 Challenges 70 2 World aviation industry 27 4.4 5-forces analysis 72 2.1 Development history of the industry

1

AVIATION INDUSTRY REPORT, Q2/2018

2

Abbreviation 3 3.3 Industry scale 49

Executive summary 4 3.4 Current situation of aviation industry in Vietnam 51

1 Business environment 6 4 Risks, driving forces and challenges 65

1.1 Macroeconomic situation 6 4.1 Industry risks 65

1.2 Legal framework 11 4.2 Driving forces 67

1.3 Trade agreements 24 4.3 Challenges 70

2 World aviation industry 27 4.4 5-forces analysis 72

2.1 Development history of the industry 27 5 Planning and forecast 75

2.2 Current situation of industry development 29 5.1 Industry planning 75

2.3 Top largest airlines in the world 37 5.2 Forecast 79

2.4 Top countries having typical airlines in the world 39 6 Enterprise analysis 83

3 Vietnam aviation industry 45 6.1 Enterprise introduction 83

3.1 Development history of the industry 45 6.2 Enterprise analysis 88

3.2 Value chain of aviation industry 47 7 Appendix of financial statements 95

Content

3

Abbreviation

Abbreviation Expansion Abbreviation Expansion

ACV Airports Corporation of Vietnam GDVC General Department of Vietnam Customs

ASK Available Seat Kilometres GSO General Statistics Office of Vietnam

BGTVT Ministry of transportation AVIAVIETNAM Vietnam Aviation Corporation

CAAV Civil Aviation Administration of Vietnam IATA International Air Transport Association

CAAC Civil Aviation Administration of China OAGOfficial Airlines Guide (dedicated to providing information

about the UK’s airline sector)

CAPA Centre for Asia Pacific aviation PRK Revenue Passenger Kilometres

AIRPT Airport RTK Net revenue/ton/km

IA International Airport VJC Vietjet Aviation Joint Stock Company

FTK Freight Tonne Kilometres

4

The demand for passenger and cargo transportation in 2016 flourished

all over the world.

The increasing demand resulted from lower ticket prices in 2016.

While the middle class in Europe and North America remained

unchanged that in the Asia-Pacific region rose sharply

Actual per capita prices of air transportation continue to decline,

Executive summary

Content is intentionally removed for demo purpose

5

Shipping and air transportation are primarily used for long haul

international routes.

According to IATA, Vietnam is one of the 5 airway markets with largest

increase in passenger volume

Airline revenue has grown steadily over the years

Accordingly, in the first three months of 2018, the total number of flights

operated by four airlines

Executive summary


6

1. Business environment

1.1 Macroeconomic situation

1.2 Legal framework

1.3 Trade agreements

Content

7



Domestic economic situation in the first quarter has still stayed positive

since the end of 2017, the gross domestic product in quarter 1/2018 is

estimated to increase by 7.38% over the same period in 2017.

Source: VIRAC, GSO

GDP growth by quarter, 2015 - Q1/2018

Source: VIRAC, GSO

%

Transportation and warehousing’s contribution to GDP,

2013 – 3M/2018e


8



Source: VIRAC, Economist Intelligence Unit

USD billion

Disposable income and household expenditure, 2010 – 2017e

VND/USD exchange rate, 2013-3/2018

Source: VIRAC, SBVContent is intentionally removed for demo purpose

9



USD/barrel

Source: VIRAC, World Bank

World crude oil prices, 2011 - 3/2018


10



Source: VIRAC, Vietnam National Administration of Tourism

Million people

Source: VIRAC, GDVC

USD billion

Commodities import - export, 2015 – Q1/2018

Tourist arrivals to Vietnam, 2010-2017e


11



1.2 Legal framework


Content

12


1.2 Legal framework

Law on civil aviation No. 66/2006/QH11 issued on June 29th 2006.


13

On July 1st, 2015, the law on amending and supplementing some articles of the civil aviation law officially took effect, with more renovated content,

creating favorable conditions for passengers and enterprises:


1.2 Legal framework


14


1.2 Legal framework


15

Circular No. 36/2015/TT-BGTVT on managing the charges of internal air transportation and specialized services and Circulars on amending and guiding

alongside such Decisions as 4213/QĐ-BGTVT, 3065/QĐ-BGTVT, 2345/QĐ-BGTVT and Circular No.07/2017/TT-BGTVT.


1.2 Legal framework


16


1.2 Legal framework


17


1.2 Legal framework


18


1.2 Legal framework


19

Circular No.146/2016 / TT-BTC on charging, collecting and managing airfares over Vietnam’s Vietnam's airspace has become effective since January 1st,

2017.

Maximum takeoff weight

(MTOW)

Airfare (USD/flight)

Maximum takeoff weight

(MTOW)

Airfare (USD/flight)

For flights across Vietnam’s airspace and notification zone under

Vietnamese trackingFor flights across Vietnamese airspace


1.2 Legal framework


20

Decree No. 92/2016/ND-CP regulating conditional business lines and trades in the field of civil aviation


1.2 Legal framework


21


1.2 Legal framework


22

Circular 36/2014/TT-BGTVT regulating the minimum service quality for passengers at airports.

Circular No. 14/2015/TT-BGTVT regulating non-refundable fixed compensation in air passenger transport.


1.2 Legal framework


23


1.2 Legal framework


24



1.2 Legal framework


Content

25



Impacts from CPTPP


26

AEC’S impact on the airline sector - the aviation industry is one of the incentivized areas targeted in the integration process of Southeast Asian

countries.




27

2 World aviation industry

2.1 Development history of the industry

2.2 Current situation of industry development

2.3 Top largest airlines in the world

2.4 Top countries having typical airlines in the world

Content

28

2. World aviation industry



29






Content

30

The demand for air travel and cargo transportation in 2016 flourished all

over the world.

STT Airline Ton/Km

Top 10 cargo transport airlines (FTK), 2016Top 10 passenger transport airlines (RPK), 2016

STT Airline USD million

Source: VIRAC, IATA

Source: VIRAC, IATASource: VIRAC, IATA



RPK, FTK growth rate, 2012 - 2016


31

Source: VIRAC, Worldbank

Jet fuel prices at major currencies, 2015 – 11/2017


Billion people



Global air travel passengers, 2012 - 2016


32

Passenger and cargo transport growth by region, 2016

Source: VIRAC, IATA




33

Typical countries

Source: VIRAC, IATA

Million people



The center for aviation promotion continued to shift towards East Asia

and occupied the second rank in 2016.

Top flight routes with strong passenger growth

(direct flight), 2016


34

The passenger load factor (The percentage of seats filled per each flight)

rose to record levels.

Source: VIRAC, IATA

Source: VIRAC, IATA



Passenger load factor, 2012 - 2016

Travel expenses and commercial air cargo

values, 2012-2016


35

Aviation transport contributes greatly to economic development.

Source: VIRAC, IATA



Connected airports and actual transport freight, 2012-2016


36

Safety has been improved

Total accidents Accident growth Hull loss rateFatal accident

numberFatal accident rate Death number

World aircraft accidents, 2016

Source: VIRAC, IATA

Source: VIRAC, IATA



Flight

Accident rate per 1 million flights by region, 2016


37






Content

38

Top 10 world's largest airlines, 9/2017

No. Airline Seat quantityPassenger

volumeAircraft

1

2

3

4

5

6

7

8

9

10

Source: VIRAC, OAG




39






Content

40

No. Country

Number of passengers 2016

(Million people)

CAGR

(2010 – 2016)

1

2

3

4

5

6

7

8

9

10

Top largest aviation passenger markets, 2016





41


2.4 Top countries having typical airlines in the world – The U.S

Million people


Number of air travel passengers in the U.S, 2010 - 2016


42

Source: VIRAC, IATA

Source: VIRAC, CAAC, Worldbank

Million people


2.4 Top countries having typical airlines in the world - China

Number of air travel passengers in China, 2010 - 2016

Number of aircraft required in China for the next 20 years, 2016


43


Million people


2.4 Top countries having typical airlines in the world - India

India has surpassed Japan to emerge as the third-largest domestic

aviation markets in the world in 2016

Number of air travel passengers in India, 2010 - 2016


44


Million people


2.4 Top countries having typical airlines in the world - Japan

Number of air travel passengers in Japan, 2010 - 2016


45

3 Vietnam aviation industry


3.2 Value chain of aviation industry

3.3 Industry scale

3.4 Current situation of aviation industry in Vietnam

Content

56

3. Vietnam aviation industry



47




3.3 Industry scale


Content

56

Value chain of aviation industry




49




3.3 Industry scale


Content

56


3.3 Industry scale

Source: VIRAC, GSO

Source: VIRAC, GSO

VND billion

VND billion

Aviation revenue, 2010 - 2016

Capital and fixed assets in the airline passenger transport,

2010-2016


51




3.3 Industry scale


Content

52

Actual use of means of transport today,

Source: VIRAC, GSO

Source: VIRAC, GSO



Passenger transport proportion, 2012 - 3M/2018

Cargo transport proportion, 2012 - 3M/2018


53

Source: VIRAC, CAPA



Source: VIRAC, CAPA

* Regional aircraft are aircraft only used in certain areas.

Number of aircraft in Vietnam, 2011 - 4/2018

Aircraft structure by airlines, 4/2018


54

Type of aircraft Quantity

HVN fleet, 2017

Type of aircraft Rented Ownership Total

VietJet Air fleet, 2017

Type of aircraft Quantity

Jetstar fleet, 2016

Source: VIRAC, HVN

Source: VIRAC, VJC

Source: VIRAC, CAPAOwned by VNA and VASCO




55

Source: VIRAC

Comparison between common aircrafts in Vietnam

Competitiveness HVN VJC

Source: VIRAC

Competitiveness of major airlines in Vietnam




56

Source: VIRAC, CAA

Source: VIRAC, CAPA



Passenger traffic growth over the years, 2010 - 2017e

Domestic market share, 2011 - 2017


57

Current situation in use of modes of transportation today

Source: VIRAC, ACV

Source: VIRAC, ACV

Number of flight operations, 2014 – 3M/2018

Passenger volume

(Million people)Growth

Top air routes having the highest growth rate in number of passengers, 2011 - 2015e

Source: VIRAC, IATA

Thousand flights



Share of flight operations by airlines, 3M/2018


58



Source: VIRAC, Euromonitor

Sales structure by airline group, 2010 - 2017f


59

Source: VIRAC, Euromonitor



Revenue structure by sales channel, 2010 - 2017f


60

Source: VIRAC, frightstats.com

Source: VIRAC, CAA



World’s top punctual airlines, 2016

On-time take off rate, 3M/2018


61

One of the key issues is related with unpuntual takeoff and cancellations

Source: VIRAC, CAASource: VIRAC, CAA



Cause group of unpuntuality, 3M/2018 Cause group of cancellations, 3M/2018Content is intentionally removed for demo purpose

62

Source: VIRAC, CAA

Source: VIRAC, CAA



Structure of unpunctual take off of each airline by cause,

3M/2018

Cancellation structure by cause of each airline, 3M/2018


63

Source: VIRAC, IATA

Average seat occupancy rate, 2010 - 2017

HVN VietJet Air Jetstar World

2010

2011

2012

2013

2014

2015

2016

2017




64




65

4 Risks, driving forces and challenges

4.1 Industry risks

4.2 Driving forces

4.3 Challenges

4.4 5-forces analysis

Content

66

4. Risks, driving forces and challenges

4.1 Industry risks

Business environment risk

Legal risk

Competitive risk

Sector specific risk

Information risk

Interest risk

Material price risk

USD/barrel

Source: VIRAC, Indexmundi

Jet Feul prices, 2013 - 2017


67


4.1 Industry risks

4.2 Driving forces

4.3 Challenges


Content

68

Source: VIRAC, GSO


4.2 Driving forces

Population pyramid, 2016


69

The percentage of air travel passengers is low compared to that of

countries in the region.

Source: VIRAC, FT Confidential research


4.2 Driving forces

No. Region Country Visa-free period

Source: VIRAC, Ministry of Foreign Affairs

Visa exemption policy of Vietnam, 2017

Percentage of people using aviation services, 2016Content is intentionally removed for demo purpose

70


4.1 Industry risks

4.2 Driving forces

4.3 Challenges


Content

71


4.3 Challenges


72


4.1 Industry risks

4.2 Driving forces

4.3 Challenges


Content

73

Competitiveness among enterprises

Power of bidding


4.2 Driving forces

Big customer position, low substitute product risk


74

Power of suppliers Barriers to entry


4.2 Driving forces


75

5 Planning and forecast

5.1 Industry planning

5.2 Forecast

Content

76

Decision No. 1012/QD-TTg approving the master plan for the development of the logistics center system in the whole country up to 2020, with

orientation to 2030 with the following contents:

Development

targets

2007 – 2010 2010 – 2015 2015 – 2020 2020 – 2030

Transport volume of airlines in VietnamGrowth rate

Development targets 2010 2015 2020 2030

Source: VIRAC

Source: VIRAC

5. Planning and forecast



77




78




79

5 Planning and forecast


5.2 Forecast

Content

80

Number of new

passengers each year

(Thousand people)

Average growth

International routes having the largest passenger volume, 2035

Source: VIRAC, IATA


5.2 Forecast – World


81

Source: VIRAC, IATA

Air travel passenger growth forecast, 2035


5.2 Forecast – World


82

Air travel passenger growth forecast, 2020f

Source: VIRAC


5.2 Forecast – Vietnam


83

6 Enterprise analysis

6.1 Enterprise introduction

6.2 Enterprise analysis

Content

84

6. Enterprise analysis


Airports Corporation of Vietnam - JSC

Source: VIRAC, HVN

Shareholder structure of Vietnam Airlines, 2016


85

VietJet Aviation Joint Stock Company

Source: VIRAC, VJC

Source: VIRAC, VJC



Flight routes, 2011 - 2017

Growth in passenger volume of VietJet, 2013 - 2019e


86

Jetstar Pacific Airlines Aviation Joint Stock Company




87

Vietnam Air Services Company (VASCO)




88

6 Enterprise analysis



Content

89

Source: VIRAC

Source: VIRACSource: VIRAC



Revenue structure of VJC, 2017 Revenue structure of Vietnam Airlines, 2017

Net revenue of goods sold and services provided,

2015 - 2017


90




91

Source: VIRAC



Gross profit margin and cost of goods sold, 2015 - 2017


92

Source: VIRAC



Expenses, 2015 - 2017


93

Source: VIRAC



VND millionAsset structure, 2015 - 2017


94

Source: VIRAC



Source: VIRAC

Profit after tax, 2015 - 2017

Profit ratio, 2015 - 2017


95

7 Appendix of financial statements

Content

7. Appendix of financial statements

96

Airports Corporation of Vietnam - JSC

BALANCE SHEET

Unit: VND million 2016 2017

A. SHORT-TERM ASSETS

I. Cash and cash equivalents

II. Short-term financial investments

III. Short-term receivable

1. Short-term receivables of customers

IV. Inventories

B. LONG-TERM ASSETS

TOTAL ASSETS

A. LIABILITIES

I. Current liabilities

1. Borrowings and short-term financial leased

liabilities

2. Taxes and other payables to the State budget

II. Long-term Liabilities

1. Borrowings and long-term financial leased

liabilities

2. Provision for long-term payables

B. OWNER’S EQUITY

TOTAL CAPITAL RESOURCES

INCOME STATEMENT


Net revenue from goods sold and services

provided

Cost of goods sold

Gross profit from goods sold and services

provided

Revenue from financing activities

Financial expense

Loan interest expenses

Cost of sales

Enterprise administration expenses

Net profit from business operations

Total accounting profit before tax

Costs of current corporate income tax

Costs of deferred corporate income tax

Profit after tax

CASH FLOW STATEMENT


I. Cash Flow From Operating Activities

Depreciation of fixed assets

Unrealized foreign exchange profit(loss)

Net Cash Flow From Operations

II Cash flow from investing activities

Purchases of fixed assets and other long-term assets

Net cash flow from investing activities

III. Cash flow from financing activities

Net cash flow from financing activities

Net cash flow of the year


97

VietJet Aviation Joint Stock Company

BALANCE SHEET


A. SHORT-TERM ASSETS

I. Cash and cash equivalents

II. Short-term financial investments

III. Short-term receivable

1. Short-term receivables of customers

IV. Inventories

B. LONG-TERM ASSETS

TOTAL ASSETS

A. NỢ PHẢI TRẢ

A. LIABILITIES

I. Current liabilities

1. Borrowings and short-term financial leased

liabilities

2. Taxes and other payables to the State budget

II. Long-term Liabilities

1. Borrowings and long-term financial leased

liabilities

2. Provision for long-term payables

B. OWNER’S EQUITY

INCOME STATEMENT


Net revenue from goods sold and services

provided

Cost of goods sold

Gross profit from goods sold and services

provided

Revenue from financing activities

Financial expense

Loan interest expenses

Cost of sales

Enterprise administration expenses

Net profit from business operations

Total accounting profit before tax

Costs of current corporate income tax

Costs of deferred corporate income tax

Profit after tax

CASH FLOW STATEMENT


I. Cash Flow From Operating Activities

Depreciation of fixed assets

Unrealized foreign exchange profit(loss)

Net Cash Flow From Operations

II Cash flow from investing activities

Purchases of fixed assets and other long-term assets

Net cash flow from investing activities

III. Cash flow from financing activities

Net cash flow from financing activities

Net cash flow of the year

7. Appendix of financial statements


98

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Documents

AVIATION INDUSTRY REPORT, Q2/2018 - VIRAC€¦ · 1.3 Trade agreements 24 4.3 Challenges 70 2 World aviation industry 27 4.4 5-forces analysis 72 2.1 Development history of the industry