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May 16, 2024 / 12:33

Gov’t seeks to defer US$160 million owed by Vietnam Airlines

The move is aimed at supporting Vietnam Airlines during a challenging time, as the flag carrier continues to struggle to recover from the Covid-19 pandemic.

The Government will propose that lawmakers consider deferring the repayment of VND4 trillion ($160 million) to ease the difficulties of Vietnam Airlines at the National Assembly's upcoming session, scheduled on May 20.

 Vietnam Airlines continues to struggle with the Covid-19 impacts. Photo: Pham Hung/The Hanoi Times

Minister and Head of the Government Office Tran Van Son, explained that the financial situation of  Vietnam Airlines is very tight due to the impact of Covid-19.

The loan is a refinancing package from the State Bank of Vietnam to credit institutions for the national flag carrier. Son emphasized that this matter is "very important and urgent and requires the National Assembly's approval at the upcoming session."

Previously, in 2020, the National Assembly approved a VND12 trillion ($471.4 million) support package to cover liquidity and increase the airline's equity. This included a VND4 trillion ($160 million) loan at 0% interest and VND8 trillion ($314.3 million) to increase charter capital by issuing shares to existing shareholders.

This support package was introduced when the national airline was on the verge of bankruptcy with overdue debts of about VND6.24 trillion ($245.1 million). During the Covid-19 pandemic (2020-2022), the aviation industry, including Vietnam Airlines, was severely affected. In 2022, the airline reported an after-tax loss of over VND11.2 trillion ($440 million).

The situation improved in 2023, with losses halved to about VND5.7 trillion ($224 million). However, due to significant losses over the previous two years, by the end of 2023, the airline's equity remained negative at nearly VND17 trillion ($668 million), with accumulated losses exceeding VND40 trillion ($1.57 billion).

The recovery of the aviation and tourism markets helped Vietnam Airlines achieve strong revenue and profit in the first quarter of this year, with a pre-tax profit of around VND1.5 trillion ($59 million) after deducting expenses.

Additionally, thanks to recording over VND3.6 trillion ($141.5 million) in other income from debt forgiveness agreements with its subsidiary Pacific Airlines, the airline's consolidated pre-tax profit exceeded VND4.5 trillion ($177 million). This is the highest profit in the company's history, surpassing the previous peak annual consolidated pre-tax profit of over VND3 trillion ($118 million) from 2017 to 2019.

Vietnam Airlines' restructuring plan for 2022-2025 is currently awaiting approval from the relevant authorities. The airline plans to restructure its assets and financial investments to increase revenue and cash flow and to prepare for the necessary conditions for share issuance and capital increase upon approval.