Vietnam parliament OKs to bail out carrier Vietnam Airlines

Vietnam’s National Assembly (NA) on November 17 approved the government’s proposal to help national flag carrier Vietnam Airlines ease the Covid-19 fallout.

Vietnam Airlines is facing a huge loss as a result of the Covid-19 pandemic. Photo: Pham Hung.

Under its resolution, the NA agreed to allow the State Bank of Vietnam (SBV), the country’s central bank, to provide refinancing loans for Vietnam Airlines to maintain its operation.

At the same time, Vietnam Airlines, in which the state currently holds an 86.19% stake via the Commission for State Capital Management (CSCM), gets the permission to sell additional shares to existing shareholders to raise its registered capital.

As such, the government would assign its investment arm State Capital Investment Corporation (SCIC) to buy Vietnam Airlines shares.

The resolution urged Vietnam Airlines to put in place measures to reduce losses and ensure operation as the Covid-19 pandemic persists.

Previously, Vietnam Airlines proposed the government provide refinancing loans worth VND12 trillion (US$518.57 million) to the airline, including a loan of at least VND4 trillion (US$172.85 million) with preferential interest rates. The bank also suggested that it could sell stake worth VND8 trillion (US$345.68 million) to existing shareholders. In this case, the SCIC could be the agency to buy this amount of shares.

Since the beginning of the year, the Covid-19 pandemic has caused severe impacts on Vietnam Airlines’ business operation, resulting in accumulated loss of VND10.5 trillion (US$453.71 million) in the first nine months of 2020, VnEconomy reported.

As of September 30, the airline’s working capital was also significantly reduced from VND1.74 trillion (US$75.15 million) to VND802 billion (US$34.64 million). Additionally, its total asset value of VND76.45 trillion (US$3.3 billion) shrank to VND62.37 trillion (US$2.69 billion).

Notably, its own equity plunged from VND18.6 trillion (US$803.57 million) to VND6.6 trillion (US$285.13 million), while Vietnam Airlines’ payables as of September 30 reached VND55.76 trillion (US$2.4 billion), 8-times higher than its own equity.