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BUSINESS REPORT

($519 million) in 2020, or VND2.42 trillion only ‘game in town’ at the moment, so airlines
($104 million) lower than its previous pre- We believe a combined have increased their capacity to compete,
diction. “We believe a combined plan that plan that includes which also leads to oversupply.”
includes refinancing loans and a share refinancing loans and a share Airlines will have to continue to adjust their
issuance to raise capital is highly feasible issuance to raise capital is business plans to be competitive. For example,
and would provide timely support to busi- highly feasible and would during the closing months of 2020, a round-
nesses given the serious impact of Covid- provide timely support to trip ticket on the Ho Chi Minh City - Hanoi
19,” its representative said. “This would not route was from a mere VND900,000 ($39) to
only help supplement insufficient cash flows businesses given the serious VND1.3 million ($56), including taxes and fees.
but also enhance the carrier’s financial impact of covid-19.” Carriers are also willing to offer free checked
capacity, replenishing its business capital, luggage and many other value-added services
ensuring the maintenance of operations, Vietnam Airlines representative to compete and bring in much-needed cash
and creating investment sources for devel- flow. Low fares are what encourage passengers
opment post-pandemic.” to fly, but present difficulties for airlines.
Vietjet Air and Bamboo Airways have
also expressed a desire in recent times to Efforts by carriers
access financial support. At a seminar held ations, so it becomes a regular capital source In order to survive and recover from the
by the Vietnam Aviation Business Associa- of the airline,” he added. “The rate of return effects of the pandemic, Vietnam Airlines
tion (VABA) in December, Mr. Nguyen Khac on the capital of Vietravel is always over 45- has been implementing a host of solutions
Hai, Deputy General Director of Bamboo 60 per cent. We are also interested in invest- such as reorganizing operations in accordance
Airways, said private airlines require the ment and financing capital from investors with the narrow market size; thoroughly cut-
same support being afforded to State airlines. and financial institutions, and have signed ting costs; restructuring and reorganizing
“Bamboo Airways has asked the National contracts with Vietcombank, BIDV, and Viet- its workforce; negotiating extensions to loan
Assembly and the government to consider inbank on a credit limit of VND850 billion repayment schedules; cease making unnec-
the same support packages for private air- ($36.7 million).” essary investments; proactively seeking and
lines as those approved for Vietnam Air- taking advantage of every opportunity to
lines,” he added. The pandemic has severely Obstacles remain increase revenue; and liquidating old aircraft
affected the operations of all carriers, he As the first airline to receive such support, in its fleet. It has also set out a number of
went on, and Bamboo Airways lost up to the representative of Vietnam Airlines said key tasks this year to ensure liquidity and
90 per cent of its business during its peak. the government has created favorable con- the continuity of operations, with the top
Though it is yet to disclose its business ditions for the carrier and jointly reviewed priority being the absolute safety of all flights,
results for 2020, he said that additional plans and implemented solutions to overcome passengers, staff, and the community. To cut
costs for quarantining and pandemic pre- the difficulties. “The disbursement of this costs and improve efficiency, the carrier con-
vention added to its losses. The government’s capital source faces certain difficulties, how- tinues to accelerate its digital transformation
financial support is necessary for companies ever, because there are still many adminis- process and apply achievements from Industry
to maintain cash flows, together with sup- trative procedures to be completed,” the 4.0 towards the goal of becoming a digital
port policies such as tax breaks. representative added. “Each stage requires aviation corporation in the future. Thanks
Vietjet, meanwhile, proposed a refinancing careful research, planning, and review, and to advantages in its fleet, it has the broadest
loan of VND4 trillion ($173 million), with must be reported to a range of authorities flight network among Vietnamese airlines,
preferential rates provided to the aviation for further review before a decision is made, plying more than 60 domestic routes con-
industry over a three to five-year period. so accessing this support takes a lot of time necting all 22 airports in the country, with
Under its proposal, Vietjet would begin repay- and effort.” flexible timetables.
ing principal and interest in the 2023-2025 Carriers also face many other challenges Vietjet Air and Bamboo Airways have
period, while existing debt that matured in on the road to recovery. International oper- slowly been restoring flights. Meanwhile,
2020 would be restructured to 2021, along ations have been significantly limited by cabins crews on certain flights of Vietravel
with a 3 per cent cut in interest rates. The border closures, meaning they are all targeting Airlines will introduce the culture and cuisine
carrier estimates that given the existing con- a bigger slice of the domestic market pie. of the destination. In its first year, it expected
ditions, the aviation industry will only fully The total passenger numbers of Vietnamese to operate from three to eight A321 aircraft
recover in 2023 at the earliest. “Other domestic carriers reached only 66 million last year, and add to its fleet as required, including
airlines also want access to preferential loans down 43.5 per cent against 2019, according wide-body aircraft. The carrier plans to operate
from the State over three to five years,” Vietjet to the Civil Aviation Authority of Vietnam more than 40 flights a week, focusing on the
Vice President and CFO Ms. Ho Ngoc Yen (CAAV). Flights as of the end of November lucrative Ho Chi Minh City - Hanoi route and
Phuong was quoted as saying. totaled just 196,600, down 36.1 per cent year- flights between certain cities and popular des-
Notably, the aviation industry has recently on-year. Though airlines have adopted plans tinations such as Nha Trang and Phu Quoc
welcomed the arrival of Vietravel Airlines, to reconfigure aircraft and switch from pas- Island. It has adopted a policy of using sec-
a hybrid carrier belonging to Vietravel Hold- sengers to cargo, cargo volumes totaled just ondary airports, such as Chu Lai to serve Da
ings. The company has committed to sup- 1.3 million tons, down 14.7 per cent. Amid Nang, Quang Nam, and Quang Ngai, Van Don
plementing capital for the airline to ensure the pandemic, Vietnam Airlines said that 100 and Hai Phong for Quang Ninh, Hanoi, and
that the minimum is no lower than VND700 of its 106 aircraft were grounded and not Hai Phong, and Can Tho for the Mekong
billion ($30.3 million). Mr. Nguyen Quoc Ky, operating, while Bamboo Airways operated Delta. “Vietnam had only five airlines but a
Chairman of Vietravel Airlines, told VET only two of its 12 aircraft. “Covid-19 resulted population of 100 million, so Vietravel Airlines
that this capital is theoretically considered in most carriers’ fleets sitting on the tarmac, will be the sixth carrier to contribute to making
a short-term capital source, or temporary while the arrival of a new airline made the the aviation market stronger and boosting
capital. “However, it is regularly and stably surplus worse,” the Vietnam Airlines’ repre- the ‘Vietnamese airline’ brand to compete
supplemented in Vietravel’s business oper- sentative said. “The domestic market is the with international airlines,” Mr. Ky said. %

FEBRUARY 2021 | VIETNAM ECONOMIC TIMES | 29