Vietnam Airlines is on runway to restructuring

Prime Minister Nguyen Tan Dung last week told the wholly state-owned Vietnam Airlines to open the throttle on restructuring. Once this process is complete, the state will continue to hold a more than 50 per cent stake in the airline but the process also clears the runway for private investors to hold up to 49 per cent of the aviation firm.

Three years ago, Dung allowed Vietnam Airlines to sell a 20 per cent stake to a foreign strategic partner.  With the new instruction, foreign investment could exceed the 30 per cent limit set in Decree 76/2007/ND-CP guiding the implementation of Aviation Law.

Le Hoang Dung, a spokesman for Vietnam Airlines, said the process was part of the national flag carrier’s restructuring plan for 2011-2015. He added the participation of other stakeholders would strengthen its business operations and competitiveness.

In the instruction, Dung also gave Vietnam Airlines the green light to keep hold of a 100 per cent stake in Vietnam Airlines Engineering. However, Vietnam Airlines must equitise Vietnam Air Petrol and can keep a holding of more than 50 per cent at this subsidiary.

Vietnam Airlines will also be allowed to decide its ownership level in Noi Bai International Airport Ground Services, Danang Airport Ground Services, and Tan Son Nhat International Airport Ground Services. The carrier operates 83 routes to 20 domestic and 26 international destinations and operates more than 300 flights daily.

Operating a young fleet of 72 aircraft – mainly Boeing 777s, Airbus A330s and A321/320s – the airline expects to further expand its fleet to 115 and 170 aircraft by 2015 and 2020, respectively.
This includes plans to purchase new and cutting-edge aircraft such as the Airbus A350XWB and Boeing 787-9.

The government decided to equitise the carrier in 2008, but progress has been slow as Vietnam Airlines was stalled when it came to selecting an adviser for its initial public offering (IPO) – the first step in pushing ahead with the equitisation.

In the middle of this year the Ministry of Transport sent a document to Prime Minister Nguyen Tan Dung outlining issues including its difficulties in fixing price for consultancy bidding package.
Under Decree 85/2009/ND-CP guiding the Bidding Law, the bidding package price for formulation of pre-feasibility study reports is determined by the average price of projects already implemented.

But, Vietnam Airlines had no information on average prices because there were no precedents for equitising a large state-owned airline.