Losses of national flag carrier Vietnam Airlines are less than expected

The national flag carrier Vietnam Airlines estimated its parent company’s losses in 2020 at over VND12 trillion (US$522 million), VND2.42 trillion (US$105 million) lower than the previous forecast in August.

Overview of the meeting.

Chairman of Vietnam Airlines Dang Ngoc Hoa revealed the figure at the airline’s extraordinary general meeting of shareholders held on December 29.

As of late December, Vietnam Airlines’ consolidated revenue stood at over VND42.5 trillion ($1.84 billion), including VND33 trillion ($1.42 billion) from its parent company, exceeding their respective targets by VND1.93 trillion ($83.8 million) or 4.8% and VND448 billion ($19.45 million).

“Higher-than-expected revenue help narrow the airline’s losses,” Mr. Hoa stated, adding the losses could further be narrowed by an addition of VND2.85 trillion (US$123.76 million) after completing procedures for depreciation adjustment and funds allocation for aircraft maintenance under the government’s support program.

In 2020, Vietnam Airlines operated 96,500 flights, down 48% year-on-year amid the Covid-19 crisis. This resulted in declines of 51% year-on-year in the number of passengers to 14.23 million and a fall of 47% in the amount of cargo for transportation at 195,000 tons.

For the next five years, Vietnam Airlines targets to resume its operation, while continuing to push for restructuring process.

“The airline is set to streamline its organization structure and enhance efficiency in performance, especially in the sale and leaseback (SLB) of aircraft,” stated Mr. Hoa.

Vietnam Airlines plan to divest a part of its investment capital at businesses with high efficiency in the aviation industry to support the airline’s financial conditions.

At the meeting, shareholders have approved the plan to sell additional shares of Vietnam Airlines worth VND8 trillion (US$347.2 million) to existing shareholders. As such, the government would assign its investment arm State Capital Investment Corporation (SCIC) to buy Vietnam Airlines shares.

The move was previously approved by the National Assembly on November 17 to help the airline ease the Covid-19 fallout.

Following the deal, Vietnam Airlines’s equity would be around VND8.27 trillion (US$357.46 million) by the end of 2020 and VND8.24 trillion (US$357.6 million) by the end of 2021, reducing the debt-to-equity ratio from 6.19 to 5.22 by late 2021.

Vietnam Airlines is expected to use the proceeds from shares issuance to pay overdue debts and maintain operation.

The Committee for State Capital Management (CSCM) is the state capital’s representative at Vietnam Airlines, holding the largest stake at 86.19%, followed by Japan-based ANA Holdings with 8.77% stake.