Summary
- VietJet has been selling zero dollar fares across its international network;
- VietJet generates an average of USD15 of ancillary revenue per ticket, making it sensible to use zero dollar fares to fill seats that would otherwise be empty;
- VietJet has been pursuing rapid and strategic expansion in the international market while using innovative marketing techniques to build brand awareness.
VietJet offered on its website from 24-Jan-2018 to 26-Jan-2018 a total of 500,000 zero dollar tickets on international flights. The tickets had to be purchased each day in a two-hour window in the early afternoon and were valid for travel from 1-Mar-2018 to 31-Mar-2018 (excluding public holidays)
All 15 of VietJet's scheduled international destinations were covered in the promotion. Passengers still had to pay taxes and fees.
VietJet had a similar zero-dollar ticket promotion from 28-Dec-2018 to 30-Dec-2018. The earlier promotion was valid for both international and domestic flights for travel from 3-Jan-2018 to 31-May-2018 (excluding public holidays). VietJet promised "millions" of zero dollar tickets in the December promotion without specifying an exact number.
Promotional zero dollar fares are not unusual for low cost airlines. However, VietJet seems to be offering an unusually high number of free tickets.
VietJet expects to carry 25 million passengers in 2018, an increase of almost 50% from 2017. If it continues to run these promotions, several million passengers could potentially by flying this year on zero dollar fares.
The idea of zero dollar promotions is to raise brand awareness and get passengers to fly during off peak periods - when load factors would not normally be 100%. The concept is that a passenger not paying a fare is still likely to spend on ancillaries while with an empty seat there are no opportunities for ancillary sales.
VietJet has a large ancillary offering (as do most LCCs) and relies heavily on ancillary revenues. VietJet generated USD14.60 in ancillary revenue per passenger in 3Q2017 and USD13.60 per passenger in 1H2017. Ancillaries accounted for 23% of VietJet's total revenues in 3Q2017 compared to 20% in 3Q2016.
VietJet has consistently posted high load factors of around 90% since it commenced operations at the end of 2011. The airline has since followed a typical LCC strategy of trying to stimulate demand with low fares and fill up as many seats as possible. The strategy has enabled VietJet to quickly build up market share, initially in Vietnam's domestic market and more recently in the international market. Ancillary sales also have grown steadily and now include checked bags, food, drinks, extra legroom seats and merchandise.
VietJet has been pursuing rapid and strategic expansion. Over the last year its focus has shifted to international expansion - and naturally the airline has used some of the same pricing strategies and marketing techniques that were initially used in the domestic market.
VietJet is particularly famous for its videos of flight attendants in bikinis. Its marketing campaign has spread as far as the US with one of its girls participating in the Albuquerque International Balloon Fiesta in Oct-2017.
VietJet has launched nearly 20 new international routes over the last 16 months. Promotional fares and other marketing activities have successfully raised VietJet's profile and brand internationally.
For an airline that until recently was focused almost entirely on the Vietnamese domestic market, VietJet has become a relatively well-known brand overseas - even in markets it does not operate.
The airline has an ambitious expansion plan and intends to carry 43 million annual passengers by 2023. VietJet expects to launch several new international routes per year and as its network grows residents of more countries will have the opportunity to fly to Vietnam for free.