The Ministry of Planning and Investment last week sent a dispatch to Vietravel Airlines pertaining to policy revisions of its intention to expand its fleet.
In the dispatch, the ministry (MPI), who oversees Vietravel's appraisal activities, asked the firm to clarify certain aspects of its investment dossier, including feedback from relevant state management agencies, before submitting to the prime minister for a final decision.
Vietravel delivered a proposal to the MPI to expand its airline business in April 2022. The following October, the newcomer to the aviation sector sent its proposals to relevant state management agencies.
Vietravel was originally approved in April 2020. At the time, the number of aircraft requested for the first year of operation was three units, gradually rising to eight in the fifth year of operation, using Airbus/Boeing or equivalents. The project’s investment value was also set at $30.4 million, all as investor equity.
In the revised dossiers, Vietravel asked to change its name from Vietnam Travel Aviation Co., Ltd. to Vietnam Travel Aviation JSC, and expand the scale of the aircraft fleet.
|In the period after 2030, the company wants to be able to develop a fleet suitable to market demands, using Airbus/Boeing or equivalents. |
Thus, the number of aircraft has now surged to 25 by 2025, and 50 by 2030. After 2030, the company intends to develop a fleet suitable to market demands, using Airbus/Boeing or equivalents.
In the project’s revised dossier, Vietravel asked to raise the investment value by more than 10-fold of the approved value to $358.6 million, of which investor’s equity amounted $86.9 million, the remainder to be offset by commercial loans and investor’s returned earnings for reinvestment.
In the MPI’s dispatch, the ministry requested Vietravel to explain the difference in the project’s investment value between the document asking for revision of the project’s investment policy and the official proposal asking for investment policy revision, which differs by around $20 million.
“Since the difference is fairly big, the investor needs to carefully review figures about total investment value as well as capital raising sources to fit the practice,” said the dispatch.
Vietravel Airlines is run by Vietravel Corporation (ticker: VTR). Its first commercial fight connecting Ho Chi Minh City and Hanoi took off in January 2021.
This air carrier currently operates four aircraft and is expected to add two more to its fleet this year.
Discussing the sharp hike in capital scope, Vietravel Airlines chairman Nguyen Quoc Ky said the proposal is to meet the company’s investment development requirements, particularly the demand to upscale the aircraft fleet.
“For a fledging airline, developing the fleet is an imperative demand for subsistence and development. Only when possessing a fleet that is strong enough, would the carrier start gaining profit,” said Ky.
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Vietnam’s airport network is currently being expanded and upgraded in order to better meet international standards on the ability to receive aircraft and in many other criteria.