Airlines persist with requests for support

December 09, 2020 | 17:03
With airlines being among the hardest-hit enterprises globally this year, local carriers are hoping for government aid to keep them afloat – but while state-owned Vietnam Airlines has already received significant support, private carriers can currently only hope for the state to have their back.
1521 p24 airlines persist with requests for support
Airlines persist with requests for support, Illustrative image. Photo: VNA

At a government press conference on December 2, Deputy Minister of Transport Nguyen Ngoc Dong said that besides general support policies for the aviation sector meant to help airlines weather the global storm of COVID-19, the country also has specific policies for national flag carrier Vietnam Airlines.

“It is a corporation in which the state holds 86 per cent in stakes – therefore, the state has implemented specific policies to protect its capital from the pandemic,” Dong explained. “Meanwhile the proposal by private airlines to receive the government’s financial support should also be considered.”

The deputy minister made the statement after Vietjet and Bamboo Airways – the country’s two largest private carriers – announced they are seeking the government’s financial support, wishing for similar assistance to Vietnam Airlines.

However, the announcement by the deputy minister also means that private carriers have currently no guaranteed support, despite some efforts being made.

According to Dong, the Ministry of Transport has worked closely with other ministries and agencies on some supporting policies for businesses in the transport sector and aviation, considering to reduce ground leasing fees and tax on fuels, among others, which are aimed to be applied to all airlines without discrimination.

At the conference on the aviation sector held by the Vietnam Aviation Business Association on November 26, Nguyen Khac Hai, deputy general director of Bamboo Airways, said that during the peak period of the pandemic, 80-90 per cent of its flights were suspended.

“To help our airline overcome the impacts of COVID-19, Bamboo Airways proposes to the National Assembly and the government to consider a support package similar to that for Vietnam Airlines,” Hai said.

Similarly Vietjet, said to have strong financial capacity, incurred losses of VND2.4 trillion ($104 million) in the first nine months of 2020. Deputy general director Ho Ngoc Yen Phuong said that to ensure working capital, the carrier needs loans of VND10 trillion ($435 million).

Citing some support packages for airlines in Thailand and China, Phuong worried that when international flights resume entirely, other markets’ airlines with their governments’ significant support would be outrunning Vietnamese ones.

“All carriers are facing extreme difficulties in liquidity in the next 2-3 years due to the pandemic’s strong impact on revenues. Vietjet enquired the State Bank of Vietnam to consider a financial support of VND4 trillion ($174 million) at preferential rates for the next 3-5 years, with the carrier starting to pay back the loan from 2023-2025,” Phuong explained.

Other airlines also suggested to extend the 50-per-cent cut in landing and take-off fees and flight service fees and reduce environmental tax by 70 per cent. Moreover, some wished access to loans at zero interest rate to pay their employees’ salaries.

Tran Dinh Thien, member of the Prime Minister’s Economic Advisory Group, said that Vietnamese airlines need a lifebuoy, and the state should have financial support policies such as refinancing, preferential lending rates, and others.

Last month, the National Assembly (NA) approved several solutions to save Vietnam Airlines, including issuance of shares to increase chartered capital and refinancing.

The NA allows the state bank to refinance and grant extensions twice maximally for credit institutions, except for those under special control, for loans for Vietnam Airlines to serve its business activities.

Specifically, Vietnam Airlines will receive funding of VND4 trillion ($174 million) at a rate of 4 per cent annually, and share issuance to increase chartered capital by VND8 trillion ($348 million).

Deputy head of the Civil Aviation Authority of Vietnam Pham Van Hao forecast that Vietnam’s industry might take three years to return to the level of 2019.

By Bich Thuy

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