Vietnam Faces April Flight Cuts as Fuel Export Bans Tighten Supply

Fuel Guarantees End in March

Vietnam's two major aviation fuel importers, Petrolimex and Skypec, can guarantee supplies only through March, leaving airlines facing possible flight cuts from the beginning of April. China and Thailand, which together supply approximately 60 percent of Vietnam's jet fuel imports, have stopped exporting refined fuels as the war involving the United States, Israel and Iran disrupts energy supplies.

The Civil Aviation Authority of Vietnam warned the Ministry of Transport in a March 9 directive that shortages could affect operations in April and subsequent months. Airlines were told to review their schedules, particularly domestic routes, while airport operators were instructed to prepare additional parking areas for aircraft that might have to remain on the ground.

Vietnam imports more than two thirds of its aviation fuel. That dependence leaves its airlines exposed when foreign suppliers reserve fuel for their own markets, even if Vietnamese companies are willing to pay more. April supply contracts remain uncertain, and finding replacement sellers has become difficult across a region facing the same disruption.

The Civil Aviation Authority of Vietnam set out the timing of the danger in its March 9 directive:

There are risks of jet fuel shortages for Vietnamese airlines from the beginning of April and the following months.

Skypec has urged authorities to restrict air transport to essential domestic routes if the conflict continues. Such a measure would represent an unprecedented contraction of Vietnam's aviation network. Singapore, another established supplier, has also reduced shipments to Vietnam, narrowing the options available to importers.

By March 16, the pressure had spread beyond securing enough fuel. Higher purchase prices were pushing importers toward their borrowing limits, while airlines faced the prospect of paying more to operate fewer flights.

How the Supply Crisis Developed

The conflict began on February 28 with strikes on Iranian facilities. It disrupted global energy markets and prompted countries in the region to retain refined petroleum products for domestic use. Refined products are fuels made from crude oil, including gasoline, diesel and the aviation kerosene used by aircraft.

The Strait of Hormuz is central to the disruption. Roughly one fifth of global oil supplies normally passes through this narrow maritime route. Iranian attacks on tankers and energy infrastructure across the Gulf region disrupted incoming crude supplies, while the closure of the strait put pressure on countries dependent on those shipments.

China first urged its domestic refiners at the beginning of March to avoid making new export commitments. Thailand then imposed its export restriction on March 6. Vietnam's aviation authority issued its warning on March 9, before China introduced an immediate prohibition on refined fuel exports effective March 11.

The sequence left Vietnam with little time to replace suppliers before the end of its guaranteed deliveries:

• February 28: The war began with strikes on Iranian facilities, disrupting energy markets.
• Early March: China urged refiners not to agree to new export commitments.
• March 6: Thailand banned exports of refined petroleum products, with exceptions for Myanmar and Laos.
• March 9: Vietnam's aviation authority warned of shortages beginning in April.
• March 11: China's immediate ban covered refined fuels that had not already cleared customs.
• March 15: Vietnamese Foreign Minister Le Hoai Trung raised energy security with Chinese Foreign Minister Wang Yi in Hanoi.

China's March 11 ban covered gasoline, diesel and jet fuel. Its scope meant that export fuel awaiting customs clearance was also affected. Beijing's aim was to preserve internal reserves as disruption in the Gulf threatened the crude supplies needed by its refineries.

Thailand's Domestic Shortages Add Pressure

Thailand's March 6 restriction covered all refined petroleum products, including aviation fuel. Myanmar and Laos received exceptions, but Vietnam did not. Thailand imposed the measure as panic buying and distribution problems put its own fuel network under strain.

Motorists queued for as much as three kilometers outside petrol stations in districts such as Mae Sot. Some stations ran out of diesel early in the morning, while others limited purchases to approximately 1,000 baht per customer. In Takua Pa district in Phangnga, businesses said depots were supplying 30 to 40 percent less fuel than usual, forcing them to ration supplies carefully.

The Thai government held urgent meetings with oil traders and refinery representatives to address delivery delays. It deployed additional fuel trucks and increased delivery frequency. The export ban nevertheless remained in place, giving priority to domestic stability over regional trade commitments.

Vietnam is especially exposed to China's restrictions because it was the third largest buyer of Chinese aviation kerosene last year, behind Australia and Japan, according to Chinese customs data. Losing access to both China and Thailand at the same time removes suppliers responsible for most of its imported jet fuel.

The immediate problem is therefore a combination of disrupted crude shipments and restrictions on the finished fuel that Vietnam purchases. Even where fuel can still be produced, governments are directing more of it toward their own consumers.

Vietnam Appeals to Beijing and Bangkok

Foreign Minister Le Hoai Trung asked for close coordination on energy security during his March 15 meeting with Chinese Foreign Minister Wang Yi in Hanoi. The meeting had been scheduled before the crisis, but the threat to fuel supplies gave the discussions new urgency.

The Vietnamese government's official news portal described Trung's request. China's account of the meeting did not explicitly mention energy security. On Monday, March 16, a Chinese foreign ministry spokesperson said Beijing was ready to increase cooperation with Vietnam and other countries to tackle energy security challenges together.

Prime Minister Pham Minh Chinh also asked Thailand to help address the shortage during a Friday meeting with the Thai ambassador in Vietnam. Thai authorities had not publicly responded to requests for comment about possible changes to their export prohibition.

Vietnam's diplomatic effort extends beyond those two suppliers. Chinh has held telephone calls with leaders in Kuwait, Qatar and the United Arab Emirates to secure crude oil and fuel supplies. He has also requested assistance from Japan and South Korea to increase access to petroleum resources.

These appeals address different parts of the supply chain. Crude oil is the raw material refineries process, while jet fuel is the finished product airlines need. Vietnam is seeking both as it tries to keep aircraft flying and meet wider demand for transport fuels.

Replacement Suppliers Face Their Own Constraints

The Civil Aviation Authority has identified South Korea, Japan, Brunei and India as possible alternative sources of jet fuel. Its March 9 document nevertheless acknowledged that finding new suppliers was difficult in the current circumstances.

Many potential sellers face pressure from the closure of the Strait of Hormuz themselves. They may give priority to domestic fuel demand over export commitments, limiting Vietnam's ability to replace the volumes previously supplied by China and Thailand.

Vietnam's two domestic refineries also have limited room to respond. Both are under pressure to increase production of other petroleum products. Rapidly expanding jet fuel output would be technically difficult and economically challenging, even if sufficient crude oil were available.

A refinery produces several fuels from crude oil, and Vietnam needs more than aviation kerosene during this emergency. The demand to raise output of other products therefore competes with the airlines' need for more jet fuel.

The supply challenge has three parts: finding a seller, obtaining deliveries in time and securing enough financing to pay the higher price. Vietnam's importers and airlines are facing all three before April begins.

Airlines Review Flights and Aircraft Parking

Vietnam's aviation sector has expanded rapidly in recent years to meet demand from business travelers and tourists. It has become an important engine of economic growth and tourism, making the prospect of widespread flight reductions a concern beyond the airlines themselves.

The aviation authority's instruction to review schedules gives particular attention to domestic routes, which may face deeper reductions than international services. Maintaining international connections has economic importance, while domestic flights often have thinner profit margins and less room to absorb a sudden increase in fuel costs.

Sun PhuQuoc Airways told regulators in documents submitted in March that it planned to adjust its schedules over the next one to three months because of fuel price volatility. The airline did not respond to requests for comment. Its disclosure points to operational adjustments among smaller carriers as they confront changing fuel costs.

Vietnam Airlines and VietJet, the dominant carriers in the domestic market, declined to comment publicly on their contingency plans. No confirmed scale of flight reductions was given. The request for additional aircraft parking nevertheless shows that officials are preparing for the possibility that substantial portions of the national fleet could temporarily stop flying.

Aircraft that remain on the ground still generate bills. Airlines must pay leases, maintenance expenses and crew salaries even when flights bring in no revenue. A prolonged grounding could create cash shortages for carriers already dealing with debts from their recovery after the pandemic.

Higher Fuel Prices Strain Borrowing

Jet fuel prices have risen more than 50 percent above levels before the conflict. Front month jet fuel paper swaps in Singapore were trading at approximately $157 per barrel on a cost and freight basis, according to LSEG pricing data.

A paper swap is a financial contract tied to a fuel price, rather than a shipment of fuel itself. Front month refers to the nearest monthly contract. Cost and freight includes the cost of the product and its transport. The price gives airlines and importers a measure of the sharply more expensive market in which they must arrange purchases.

Petrolimex and Skypec warned regulators that they were rapidly approaching the limits of their credit lines. Those lines are borrowing arrangements that allow companies to pay for purchases before the money from subsequent sales arrives. When fuel prices rise much faster than expected, the same borrowing limit buys less fuel.

Both importers have asked banks for more flexible financing until market conditions return to normal. Banks may be reluctant to extend additional credit when the value of the fuel supporting the borrowing is changing so quickly.

Airlines therefore face higher costs even if Vietnam secures replacement supplies. Importers need more money to buy each shipment, and carriers need more money to operate each flight. For businesses already carrying fixed aircraft and staffing costs, reduced flying and expensive fuel create pressure from both directions.

The Wider Fuel Emergency in Vietnam

Vietnam's Ministry of Industry and Trade has called on businesses to encourage working from home where possible to reduce transport fuel consumption. The request reflects an emergency extending well beyond aviation, with motorists and businesses also facing sharp price increases.

Petrolimex data showed gasoline prices up 32 percent, diesel up 56 percent and kerosene up 80 percent since the end of February. Kerosene's reported rise was the largest of the three, while diesel's increase was substantially greater than gasoline's.

Long queues of cars and motorbikes have become common at petrol stations in Hanoi. Drivers have rushed to fill their tanks before prices rise further or fuel becomes unavailable, adding pressure to distribution at a time when supplies are already uncertain.

Vietnam has eliminated import tariffs on fuels through the end of April and drawn on its national fuel price stabilization fund to limit retail price increases. Removing an import tariff reduces a tax paid on incoming fuel, while the stabilization fund is being used to soften the increase faced by consumers.

The end of April is an important policy deadline alongside the airlines' earlier supply deadline at the start of that month. Importers can guarantee aviation fuel only through March, while the temporary tariff relief continues through April.

Domestic measures to reduce consumption and restrain prices are running alongside Chinh's requests for overseas supplies. Together, they seek to limit demand, lower some purchasing costs and keep fuel reaching Vietnam during the disruption.

Asian Aviation Faces the Same Squeeze

The Strait of Hormuz closure has affected the primary maritime route through which Asian nations receive approximately 84 percent of their crude oil and 83 percent of their liquefied natural gas. The pressure on crude supplies is spreading through refineries and into aviation fuel markets across the region.

Australia imports approximately 32 percent of its jet fuel from China. Major airports such as Sydney rely entirely on imports and have no refinery capacity. With only 29 to 32 days of jet fuel reserves, Australian authorities have warned that a prolonged disruption could force flight rationing, with emergency and military aviation taking priority over commercial services.

Air New Zealand has already announced the cancellation of 1,100 flights through early May because of fuel costs and supply concerns. Its response shows how the combination of price increases and uncertain deliveries is affecting airline schedules beyond Vietnam.

Japan has pledged to release a record 80 million barrels of oil from national reserves, equivalent to approximately 45 days of supply. South Korea has lifted limits on power generation from coal, increased nuclear plant utilization to 80 percent and introduced its first domestic fuel price cap in nearly three decades.

The Philippines has introduced a workweek of four days for government employees. Pakistan has closed schools for two weeks and ordered 50 percent of government staff to work from home. Like Vietnam's request for businesses to reduce commuting, these measures aim to reduce fuel consumption.

More than 30 countries have agreed to release a record 400 million barrels from emergency oil reserves. This is the largest coordinated stockpile release in history, compared with 182 million barrels released after Russia's invasion of Ukraine in 2022. The new release is more than twice that earlier amount.

Emergency reserves provide additional oil, but a continuing Hormuz closure would keep Asian refineries under pressure to find alternative crude supplies. Governments prioritizing domestic fuel security could continue restricting exports, leaving Vietnam competing for replacement deliveries while its March guarantees expire.

What to Know

• As of March 16, Vietnam faced possible jet fuel shortages from the beginning of April and in subsequent months.
• Vietnam imports more than two thirds of its aviation fuel, with approximately 60 percent of those imports coming from China and Thailand.
• Thailand restricted refined fuel exports on March 6, followed by China's immediate ban effective March 11.
• Petrolimex and Skypec could guarantee supplies only through March, with April contracts uncertain.
• Airlines were told to review domestic schedules, and airports were instructed to prepare parking for aircraft that might be grounded.
• Vietnam sought help from China and Thailand and identified South Korea, Japan, Brunei and India as possible replacement suppliers.
• Singapore jet fuel paper swaps were approximately $157 per barrel, while rising purchase costs pushed importers toward their borrowing limits.
• Vietnam removed fuel import tariffs through the end of April and used its fuel price stabilization fund to restrain retail increases.
• Regional responses included 1,100 Air New Zealand flight cancellations and a coordinated release of 400 million barrels of emergency oil reserves.