Vietnam Airlines Faces Dual Jet Fuel Crisis: Prices Soar, April Shortages Loom

Vietnam's jet fuel crisis stems from a direct and severe supply shock. The country's heavy reliance on imports creates a critical vulnerability, with more than two-thirds of its jet fuel needs coming from abroad. Of that imported volume, a staggering 60% typically originates from China and Thailand. When both nations halted exports earlier this month, the disruption was immediate and profound.

China's move, which began with an export freeze in early March and culminated in a hard ban on refined fuel exports from March 11, directly cut off Vietnam's largest supply pipeline. Thailand followed suit, banning fuel oil exports to all countries except Myanmar and Laos on March 6. This dual restriction has left Vietnam's aviation sector with a massive shortfall, as its domestic refineries are unable to significantly boost jet fuel output to fill the gap. The operational threat is now concrete. The Civil Aviation Authority of Vietnam has issued a clear warning, stating there are risks of jet fuel shortages for Vietnamese airlines from the beginning of April and the following months. This sets a specific timeline for the crisis, forcing airlines to prepare for potential flight reductions starting in April.

The Demand and Cost Pressure: Airlines on the Front Line

The surge in jet fuel prices is now hitting airlines directly, with Vietnam Airlines warning of severe financial strain. Prices in Asia have rocketed over 70% to record highs, with spot prices in Singapore hitting $225.44 a barrel. This spike, driven by fears of supply disruptions through the Strait of Hormuz, has created a massive new cost burden. Vietnam Airlines has stated that its operating costs could double if fuel prices remain around $200 per barrel, a scenario that would crush already thin profit margins.

This isn't just a theoretical risk. The Civil Aviation Authority of Vietnam has instructed airlines to review schedules and prepare for flight reductions, especially on domestic routes. The directive underscores the operational threat: while higher prices can be managed through fare adjustments, a physical fuel shortage would force direct flight cancellations and schedule cuts. The authority's proposed support measures, including tax exemptions and fee reductions, highlight the severity of the situation.

The pressure is building on multiple fronts. The price surge reflects a market expecting a severe shortage, with profit margins for producing jet fuel jumping to over $100 per barrel. For Vietnamese carriers, this means a dual crisis-soaring input costs compounded by the real possibility of supply constraints. The coming weeks will test their ability to navigate this turbulence.

The Balance Sheet Impact and Policy Response

The financial strain on Vietnam's airlines is now a direct threat to their operations. With jet fuel prices having risen by around 80 percent in Asia, carriers face a severe squeeze. Vietnam Airlines has warned that its operating costs could double if fuel prices remain around $200 per barrel. For an industry with already thin profit margins, this is a critical vulnerability. The pressure is twofold: soaring input costs that eat into earnings, and the looming risk of a physical supply shortage that could force flight cancellations.

If shortages worsen, the operational response will be a reduction in capacity. The Civil Aviation Authority has instructed airlines to review their schedules, especially on domestic routes, and prepare for possible disruption. In practice, this means airlines may need to cut frequencies, suspend some services, or focus only on the most important routes. This would directly impact revenue and customer service, particularly for the large domestic market that supports tourism and regional connectivity. The authority's warning that there are risks of jet fuel shortages for Vietnamese airlines from the beginning of April and the following months sets a clear timeline for these adjustments.

The government is attempting to mitigate the burden with a package of proposed support measures. These include exempting environmental protection tax on aviation fuel through May 2026, adding aviation fuel to goods eligible for value-added tax reductions, and allowing flexible fuel surcharges. It has also proposed raising domestic airfare caps and cutting aviation fees by 50%. These steps aim to ease the financial pressure on airlines and provide some relief to consumers.

Yet the sustainability of these measures is limited by a fundamental constraint: domestic supply cannot be significantly ramped up. As the regulator notes, Vietnam's refineries cannot significantly boost jet fuel output. The country's heavy reliance on imports-more than two-thirds of its jet fuel needs-means that local production is already stretched to meet other petroleum product demands. This structural vulnerability means that while policy can soften the blow, it cannot solve the core supply problem. The proposed measures may help airlines manage costs in the short term, but they do not address the physical shortage looming in April.

Catalysts and Risks: What to Watch

The path forward hinges on a few critical variables that will determine whether the crisis abates or deepens. The immediate catalyst is the resolution of the Middle East conflict and the reopening of the Strait of Hormuz. While U.S. assurances are being made, the market remains unconvinced, and jet fuel prices have already surged over 70% to record highs. A swift normalization of shipping through the strait would be the single most powerful force to ease global supply fears and bring prices down. For Vietnam, this would be a necessary but not sufficient condition, as the country's specific export bans from China and Thailand would still need to be lifted.

The next key watchpoint is the trade policy response from Vietnam's two largest suppliers. China imposed a hard ban on refined fuel exports from March 11, while Thailand banned fuel oil exports to all countries except Myanmar and Laos on March 6. The resolution of these national export restrictions is the most direct route to restoring Vietnam's supply chain. The country has already reached out to both nations for help, but there is no indication yet of a timeline for a reversal. Until these bans are lifted, Vietnam's aviation sector remains exposed.

In the meantime, the search for alternative suppliers is underway. Vietnam has seen reduced supplies from Singapore, its other major source. The ability to secure new, reliable contracts from other Asian or global suppliers will be crucial. However, this is a complex and time-consuming process, especially for a specialized product like jet fuel that requires specific handling and storage. The success of these efforts will be a key indicator of whether the physical shortage can be averted.

Finally, watch for further government policy actions. The initial support package, including tax exemptions and proposed fare cap changes, is designed to manage the financial strain. If the crisis persists into April, more aggressive measures may be needed. This could include direct subsidies, expanded fuel surcharge flexibility, or even emergency fuel allocations. The sustainability of these measures, however, is limited by the fundamental supply constraint: Vietnam's refineries cannot significantly boost jet fuel output. The government's ability to navigate this tension between short-term relief and long-term supply security will be a major test.

The bottom line is that the crisis is now a race against time. The watchpoints are clear: monitor the Middle East situation for supply normalization, track the export policies of China and Thailand for a reversal, assess the progress on securing alternative suppliers, and watch for new policy moves from Hanoi. The coming weeks will reveal whether these catalysts align to ease the pressure or if the risks of operational disruption, as warned by the Civil Aviation Authority, become a reality.