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Vietnam Airlines asks the Government for emergency assistance of VND 12,000 billion

Vietnam Airlines asks the Government for emergency assistance of VND 12,000 billion

Tuesday 14, 07 2020
Expected cash flow this year is VND 16,000 billion deficit, CEO of Vietnam Airlines asks the Government for emergency assistance of VND 12,000 billion.

At a meeting with the Prime Minister's Economic Advisory Group, Vietnam Airlines CEO Duong Tri Thanh estimated that the company suffered a net loss of 13 trillion dongs, although the domestic market has gradually recovered.

Earlier, chief accountant Tran Thanh Hien had expected a loss of about VND 15,000 - 16,000 billion at the beginning of June. The reduction of losses, according to Mr. Thanh, was due to the application of policies on tax reduction on petrol fees and slow depreciation. Thus, with this result, compared with 2019, the company's revenue this year halved, to about 50,000 billion.

Since April, Vietnam Airlines no longer operates international commercial passenger flights. For the whole month, the airline flies only 4 flights per day on average. "Since 1975, Vietnam has never had so few flights in the sky," Thanh said.

By June, the domestic market of Vietnam Airlines increased by 84% last year but revenue has not recovered. Mr. Thanh explained that in the past 3 months, Vietnam Airlines has continuously opened 18 new domestic routes, mostly short routes, sold at very cheap prices. In fact, a few dozen new domestic routes are equal to one international route.

The CEO of Vietnam Airlines predicts that the domestic aviation market will recover by the pre-epidemic level by the end of 2021 - in 2019, while the international market will have to end by 2022.

"We ask the Government - as the owner of emergency assistance of VND 12,000 billion, if not by the end of August, it will be very difficult," Vietnam Airlines CEO said.

Mr. Thanh said that the reason for asking the owner is the Government for support because he also discussed with All Nippon Airways (ANA) - a shareholder holding 8.6% of Vietnam Airline’s capital. However, just like global airlines, ANA is even more difficult to find a way to borrow $ 10 billion. Therefore, ANA no longer has money to lend to Vietnam Airlines.

Besides, according to Mr. Thanh, as a national airline, in addition to the common task, Vietnam Airlines must also serve national security and defense, the role of the State entrusted, rescuing and repatriating more and more.

In the recent period, Vietnam Airlines has actively implemented many measures to save VND 5,000 billion, including more than VND 1,700 billion to reduce salaries, negotiate to delay payment for chartering of more than VND 2,300 billion and defer the loan interest of VND 1,940 billion. Mr. Thanh believes that if supported, Vietnam Airlines will restore and fulfill its duties.

In the period of 2010 - 2019, Vietnam Airlines Group (including Vietnam Airlines, Jetstar Pacific, and VASCO) has contributed over VND 44,000 billion to the state budget, of which in 2019, Vietnam Airlines contributed nearly VND 2,600 billion.

Mr. Nguyen Dinh Cung, Director of the Central Economic Management Research Institute, said that it should not be called "Government to save Vietnam Airlines". According to him, it is necessary to clearly define the role of the Government as the owner with the role of a managerial agency, creating an equal business environment.

Vietnam Airlines asks the Government for emergency assistance of VND 12,000 billion

According to Mr. Cung, choosing Vietnam Airlines is an example of the role of the owner of the Government because all countries support the aviation industry, including national airlines. This may be the first factor to recover after the epidemic, promote economic recovery, tourism ... "Countries do more and faster than Vietnam with both roles as management agencies and investors because The cargo is not important and needs to be maintained, "said Mr. Cung.

Mr. Cung said, firstly, subsidies such as tax and fee exemptions. Meanwhile, Vietnam has only reduced taxes and exempted some fees. As the owner, the capital owners, countries can lend, guarantee loans, invest capital through issuing to existing shareholders, increase capital to hold a certain percentage of ownership to help businesses. No bankruptcy. Governments have lent about $123 billion, including capital loans, salary subsidies, loan guarantees, equity increase, mining subsidies, etc.

According to Mr. Cung, in case Vietnam Airlines is very illiquid, not only the board of directors, the owners, the shareholders also have to think about how to maintain and survive. Therefore, he said that the company should not be asked for help or rescue from the Government - as the owner.

According to the International Air Transport Association (IATA), the global aviation industry will need 3 years to recover to the level of 2019. After the global financial crisis in 2008, the industry lost about 20 billion USD, then Each year profit of 30-40 billion. However, because of Covid-19 this year, the global aviation industry is expected to reduce revenues by $419 billion, losses of  $84 billion, and losses of $15 billion by 2021. IATA estimates that the aviation industry needs the least support from governments $250 billion.

Source: Vietnam Finance

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