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Vietnam Approves $520m Package to Rescue Cash-Strapped Vietnam Airlines

Vietnam Airlines still has to produce a thorough restructuring strategy, but its financial situation will not be as tight as during the worst months of the pandemic.

Nikkei Asia reports that on November 17, the National Assembly unanimously agreed on a VND12 trillion (US$520 million) rescue plan that national carrier Vietnam Airlines requested a few months ago. According to the plan, the State Bank of Vietnam will be able to refinance and extend credit deadlines for VNA, albeit no more than twice.

Vietnam Airlines will issue new shares, worth VND8 trillion, to its shareholders. On behalf of the central government, the holding company of state-owned enterprises, State Capital Investment Corp., will buy 85% of the new shares. The rest of the VND4 trillion comprises soft loans.

In July, Vietnam Airlines CEO Dương Trí Thành shared that the carrier was expected to record VND16 trillion in negative cash flow, and asked for the central government to help with urgent aid of VND12 trillion.

He elucidated that the company has undertaken many cost-cutting measures to save some VND5 trillion in operating costs. It slashed about VND1.7 trillion in staff salary and negotiated to delay plane rental payments and loan interests worth VND2.3 trillion and VND1.94 trillion, respectively.

Vietnam Airlines was hoping to seek loans from All Nippon Airways (ANA), which currently holds 8.6% of VNA shares, but the Japanese airline was plagued with its own cash flow problems, a common fate for all international air carriers in pandemic-stricken 2020.

Back in October, VNA disclosed that it lost US$463 million in the first nine months of the year due to inbound flights drying up. Even though Vietnam’s domestic market has cushioned part of the blow, internal flight routes are nowhere near as profitable as international ones, and the airline also has to shoulder many flights to rescue Vietnamese citizens stuck abroad.

Trần Thanh Hiền, head of VNA's Finance and Accounting Department, said of this year’s difficulties: “The aviation industry is in an extremely difficult time. Around the world, many airlines have to sell their assets.”

“We are proactively seeking and taking advantage of every opportunity to increase revenue, such as promoting cargo transportation and charter flights to carry Vietnamese passengers back home and expert visitors, and selling old aircraft,” he added.

[Photo via VNA]

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