More leg room needed for Vietnamese aviation

A raft of measures are already in place for now until the end of the year at least Photo: Hoang Ha

The Government Office in Notice No.185/TB-VPCP dated May 17 announced the conclusions of the prime minister’s mid-May meeting on a potential 30 per cent reduction in environmental tax on flying fuels until the end of the fourth quarter. The government will submit the proposal to the National Assembly Standing Committee for approval.

This is one of the key adjustments to lending and service fees for aviation businesses included in the government’s latest draft resolution on solutions to ease businesses’ difficulties and accelerate recovery. However, many of the aviation firms’ expectations are still absent from the draft, making recovery a distant prospect.

Under the draft, from March to September, aviation businesses would also enjoy a 50 per cent reduction of the fees for taking off, landing, and flight control for domestic flights, and the minimum price for services where the price band is regulated by the state would be set to zero (see table).

In addition, aviation businesses having outstanding loans will get free guarantee for their government-guaranteed loans until December 31, 2020.

Industry insiders, however, said that these are only stopgap solutions which will only help giant like Airports Corporation of Vietnam, Vietnam Airlines, Vietjet, Jetstar Pacific, or Bamboo Airways to stay afloat.

“Airlines can now operate domestic flights but cannot relaunch international commercial flights as many countries are still in a lockdown. They can only revive when all of their aircraft can take off with the same frequency as they did in the past,” Phan Dung Khanh, Investment Advisory director at Maybank Kim Eng Securities, told VIR.

“They cannot recover for at least this year. Even when the pandemic is brought under control globally, a swift recovery is unlikely because people will still have concerns,” he added. “Even if they get other supporting policies as expected, recovery will take a long time.”

In similar view, Vaibhav Saxena, lawyer at Vietnam International Law Firm, added that a “new normal” life has gradually been restored to the post-Covid-19 epidemic and the aviation industry is starting to recover.

However, according to the leader of the Civil Aviation Administration of Vietnam, it is not until mid-2021 that the Vietnamese aviation market will be able to fully recover as before the Covid-19 epidemic.

Like other countries, India’s airlines are struggling as the country’s extended lockdown measures go on. Announcing measures to boost the country’s domestic aviation sector, Finance Minister Nirmala Sitharaman shared that steps will be taken to make the country a hub for maintenance, repair and overhaul of aircraft. “Civil aircraft and defence aircraft can benefit from that as maintenance cost for all airlines will come down and that again will have a ripple effect on passengers,” she said.

Earlier, Vietnam Airlines, Airports Corporation of Vietnam, and others sought to secure an extension of the lending term for credit contracts without a fine for late payment, restructuring debt repayment periods, and ensuring the uninterrupted lending of working capital to maintain operations, while cutting the VAT and corporate income tax.

In an effort to encourage aviation firms, Minister of Transport Nguyen Van The said, “The ministry will study further measures to help aviation businesses, particularly air carriers, to revive in the coming time.” However, the sector needs feasible and tangible measures rather than promises, and a specific rescue package is fast becoming essential. Not only in Vietnam, where the aviation industry suffered an initial loss of VND30 trillion ($1.3 billion), even globally aviation is among the hardest-hit sectors. According to International Air Transport Association, the COVID-19 crisis will see global airline passenger revenues drop by $314 billion in 2020, a 55 per cent decline compared to 2019.

Evidently, many global airline titans have fallen on hard times, with some struggling to stay afloat. For instance, national carrier Singapore Airlines posted a full-year net loss for its latest financial year, the first in its 48-year history because of the grounding of aircraft worldwide. Elsewhere, loss-making Thai Airways had to be rescued by the government which has allowed to restructure its debts to keep its planes in the sky.

This disheartening trend has also reached Malaysia Airlines. Siti Rozalina Mohd Noor, senior manager of Group Corporate Communications-Group CEO Office at Malaysia Airlines, told VIR, “COVID-19 has thrown Malaysia Airlines into a liquidity crisis, forcing us to take hard measures, which include reaching out to original equipment manufacturers and vendors to renegotiate contracts as well as offering unpaid leave and cutting salaries by 10-35 per cent among employees in order to sustain the company’s cash flow.”

The airline’s market research and trend analysis show that customers are extremely hesitant to book their travels within the next two to six months, especially with the continued uncertainties about lockdown measures and border restrictions around the world, as well as the lack of vaccination for COVID-19.