Vietnam's aviation industry seeks emergency loans to survive Covid-19 pandemic

The aviation industry is seeking two emergency loans from the banking sector to survive the Covid-19 pandemic, including refinancing loans of VND4 trillion ($175.7 million) with 0% rate and another VND25 trillion ($1.1 billion) at 4% for a period of three to four years.

Overview of the meeting. Source: SBV

General Secretary of the Vietnam Aviation Business Association Bui Doan Ne made the proposals during a meeting with the State Bank of Vietnam (SBV) and other credit institutions to discuss supporting measures for the local aviation industry on September 28.

According to Ne, the fourth Covid-19 outbreak and restriction measures have put airlines in limbo with severe financial consequences.

“As all domestic and international flight routes are temporarily suspended, airlines’ revenues since late May have drastically plunged by 80-90%,” added Ne.

While airlines have stopped operation, they still have to pay fixed costs, including aircraft leasing, which lead to rising debts and declining working capital.

“Each airline is estimated to pay over VND100 billion ($4.4 million)  while most of their fleet is grounded,” he added.

With such a dire financial situation, Ne said they are looking for loans of up to VND30 trillion ($1.3 billion), as short-term payable debts of Vietnam’s three largest airlines have amounted to VND36 trillion ($1.58 billion), including VND20 trillion ($878 million) of the flag carrier Vietnam Airlines.

Nguyen Xuan Bac, deputy director-general of the SBV Department of Credit for Economic Sectors, noted so far, banks have restructured debt payment schedules for airlines worth VND2.5 trillion ($110 million) from the total outstanding loans of VND24 trillion ($1.05 billion).

Bac added banks have also lowered lending rates by 0.5-1 percentage point per year, resulting in foregoing VND130 billion ($5.7 million) in their profits, along with new loans at preferential rates of VND41.6 trillion ($1.82 billion).

“This demonstrates the efforts from the banking sector to rescue airlines,” Bac said.

Airlines are struggling to overcome the pandemic impacts. Photo: Viet Hung

Representatives from BIDV and HDBank called for the SBV to issue guidance in providing loans for airlines that are facing consecutive losses and struggling for debt payment while raising the credit quota for banks to further provide loans for the economy and airlines.

SBV Vice Governor Dao Minh Tu said the banking sector is committed to supporting the economy, including the aviation sector.

Tu urged commercial banks to prioritize loans for airlines, saying the sector remains an important part of the economy and would rebound strongly once the pandemic is contained.

“Airlines have huge capital needs, therefore, the SBV would consider raising credit quota for banks to support airlines’ recovery,” he suggested.

From now on until June 30, 2022, the SBV may further ease lending regulations to support airlines if the situation does not improve, Tu added.

“Government agencies would continue to propose more credit package for airlines in the coming time,” Tu said.