Vietnam Travel Channel

Vietnam Airlines is running out of money and needs government loans

A Vietnam Airlines aircraft seen at Frankfurt am Main Airport, Germany. Photo by Shutterstock/Vytautas Kielaitis.

Vietnam Airlines says it running out of money and could be “technically” insolvent in July if it does not receive $300 million USD, or more, in credit from the government.

Tran Thanh Hien, the Chief Accountant of the airline said last Friday that the airline is looking at a loss of $644 ~ $687 million USD this year and that the airline could run out of money by the beginning of August.

The airline was forced to suspend all flights from late March until late April and although domestic flights have been reinstated, the airline is not flying any international routes. Revenue during this time has been significantly reduced in since February the airline has reportedly made $190 million USD in ticket refunds to passengers.

According to Tran, the airline has done all that it could to mitigate the Covid-19 pandemic, and this has included reducing costs by $193 million USD bycutting staff salaries and asking staff to go on unpaid leave.

In order to survive the airline is asking for a loan, that it will repay of $175 ~ $515 million USD from the government. Vietnam’s State Capital Investment Corporation (SCIC), which has been set up by the government for state investments, has said that it’s willing to make loans to Vietnam Airlines, but specific amounts have not been agreed to yet.

An additional route for funding and increasing capital is for the airline to issue additional shares to existing investors, but its estimated that this will take at least 6 months, which doesn’t help the airline with its short-term cash flow liquidity issues.

In 2019 the airline saw its post-tax profit fall 2.4% to $109 million USD, but investors say that the airlines is still a good “buy” since the airline is Vietnam’s national flag carrier and the government is sure to support it financially.

 

 

 

Read 56