Vietnam Airlines surges 179%, top-performing airline stock in 2024

Vietnam Airlines made a remarkable return to profit, emerging as the world’s best-performing airline stock this year. The state-owned carrier soared to 179% in 2024, buoyed by a resurgence in travel demand.

This surge in performance has allowed the airline to post a significant first-quarter profit, breaking a streak of over four years of consecutive losses.

This turnaround is particularly notable given the airline’s recent brush with insolvency and the threat of being delisted from the Ho Chi Minh Stock Exchange. Vietnam Airlines is now outperforming regional competitors, including Singapore Airlines, which has seen a 7.8% rise this year, and Air China, which has fallen by 3.7%.

A report from PYN Fund Management, one of Vietnam Airlines’ institutional investors, forecasts an all-time high revenue and turnaround profit for the carrier this year.

Analyst Huyen Tran highlighted it as PYN Elite’s stock of the month for June, predicting growth in both passenger numbers and revenue.

Southeast Asia’s airline industry is experiencing a revival as key tourist markets recover. Visitors from China, Vietnam’s largest pre-pandemic source of tourists, have surged in the first half of this year, tripling from the previous year. Vietnam Airlines, as the largest local carrier operating routes to China, stands to gain significantly from this trend.

Remains cautious

Despite the positive outlook, Vietnam Airlines remains cautious. Chairman Dang Ngoc Hoa cited macroeconomic uncertainties in a recent statement, emphasising the airline’s primary goal of reducing losses while balancing revenue and expenditure.

The airline has ambitious expansion plans, intending to add new routes to Southeast Asia and Europe. Additionally, it aims to adjust flight frequencies and increase capacity on key routes to capitalise on demand.

Vietnam’s long-term growth plans for its tourism sector are also promising. Targeted as a key industry to drive the economy, which is projected to grow by 6% this year and 6.5% in 2025, tourism is set to play a crucial role.

Analysts Tim Bacchus and Eric Zhu from Bloomberg Intelligence noted that Vietnam’s aim to attract 70 million international arrivals by 2045 could make it the second-largest tourism destination in Southeast Asia, following Thailand.

According to the Civil Aviation Authority of Vietnam, the domestic aviation market is also expanding, with passenger numbers expected to rise by 15% this year compared to 2023. Domestic cargo trade is projected to increase by 8.5%.

Despite the recent share price rally, Vietnam Airlines remains relatively small with a market value of 76 trillion dong (108 billion baht), about half the size of Australia’s Qantas Airways and one-fifth that of Singapore Airlines.

Aircraft shortages

The airline targets an after-tax profit of 4.2 trillion dong this year, a stark contrast to the 5.6 trillion dong loss posted in 2023. However, challenges remain, including a shortage of aircraft. The country’s aviation agency has urged airlines to lease more planes to meet rising demand after some jets were grounded due to engine recalls.

Other hurdles are also on the horizon. Ho Chi Minh City Securities analyst Che Thi Mai Trang has downgraded the stock to sell, citing overvaluation and lower-than-expected domestic demand. The airline, which can only trade shares in afternoon sessions due to delayed earnings reports, still needs to proceed with planned restructuring and refinancing efforts.

The National Assembly recently approved an extension on Vietnam Airlines’ 4 trillion dong state-backed loans, demonstrating government support for the carrier, which is 86% state-owned. The airline describes 2024 as a year of overcoming challenges and recovery, focusing on laying the foundation for sustainable development, reported Bangkok Post.