Transport mainstays in call for policy backing

April 15, 2020 | 09:00
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State-owned transport giants Airports Corporation of Vietnam, Vietnam Airlines, Vietnam Railways, and Vietnam Maritime Corporation suffered all-time biggest losses in the first quarter of 2020 due to COVID-19 and are trying in vain to recover, seeking for rapid supporting policies from the government.
1487p6 transport mainstays in call for policy backing
Proposals are being made to help shore up aviation groups like Vietnam Airlines

With no long queues, no rushing crowds, and no tannoy alerting late passengers, Noi Bai International Airport, one of the few profitable airports run by state-run Airports Corporation of Vietnam (ACV), is deserted these days. It is instead crowded simply with aircrafts, with the coronavirus outbreak causing nightmares for ACV and air carriers like Vietjet, Bamboo Airways, and Jetstar Pacific.

All international flights have been suspended since March 25, while the frequency of domestic routes reduced to one flight a day per carrier, thus plunging ACV and all air carriers into their most difficult period.

Duong Tri Thanh, general director of national flag carrier Vietnam Airlines said, “In the domestic market, the outbreak has pulled back aviation three or four years, and makes the accumulation of the four or five previous years to zero.”

Domino effects

Aviation is one of the transport segments hit the hardest by the pandemic. According to the Commission for the Management of State Capital at Enterprises (CMSC), which manages 19 state-owned giants including five in the transport sector, Vietnam Airlines, ACV, Vietnam Expressway Corporation (VEC), Vietnam Railways (VNR), and Vietnam Maritime Corporation (VIMC) are all suffering huge losses in the three-month span.

CMSC said in its latest report sent to the prime minister in early April that Vietnam Airlines was one of the hardest hit in the first quarter of 2020 with consolidated revenue falling by VND6.7 trillion ($291.3 million) from the same period last year to VND19.2 trillion ($834.78 million), thus hitting a loss of VND2.38 trillion ($103.47 million). Worse still, in early 2020 Vietnam Airlines had reserves of VND3.5 trillion ($152.17 million), which has all but vaporised.

As the operator of 22 airports in the country, ACV is also sitting in the same plight. Its total revenue was estimated at VND4.06 trillion ($176.5 million) between January and March, down VND832 billion ($36.17 million) on-year, while its profit was estimated at VND1.85 trillion ($80.43 million), down VND586 billion ($43.47 million) on-year.

ACV expects that some flights to China may recover in May, while those to the European Union and South Korea will remain halted until July, and other international flights will also slowly recover from August. In the domestic market since late March, the number of passengers continues to fall significantly from 60 to 70 per cent, and could recover in June. However, there will be no sudden big increase in numbers in summer as expected due to the change in education schedules.

Along with Vietnam Airlines, other airlines like Vietjet, Bamboo Airways, and Jetstar Pacific are also struggling. They are estimated to lose VND3.6 billion ($156,500), VND1.24 billion ($54,000), and VND700 million ($30,500) a month in aircraft landing fees, respectively. They also saw a drop in number of flights in March with Vietjet decreasing 39.3 per cent on-year, while Bamboo Airways sat at 21.2 per cent on-month, and Jetstar Pacific 51.4 per cent on-month.

COVID-19 is being considered the hardest blow to the aviation sector, even more so than the 2002/2003 SARS pandemic. The Ministry of Transport (MoT) estimates an initial loss of over VND30 trillion ($1.3 billion) among air carriers due to flight being postponed or cancelled.

In the road segment, VEC is hitting big rocks. Restrictions on travelling have led to a strong fall of VND15 billion ($652,000) in revenues, especially on the Noi Bai-Lao Cai, Cau Gie-Ninh Binh, Ho Chi Minh City-Long Thanh-Dau Giay, and Danang-Quang Ngai expressways, which are the golden eggs for VEC.

In rail and maritime, VNR and VIMC are also struggling to survive. Member companies of VNR, especially the two biggest railway transport operators of Hanoi Railway Transport JSC (Haraco), and Saigon Railway Transport JSC (Saratrans), have suspended a number of trains which resulted in a drop of VND65 billion ($2.82 million) on-year in passenger transport revenue and an estimated loss of VND100 billion ($4.35 million).

Vu Anh Minh, VNR chairman told VIR, “If COVID-19 keeps developing seriously, the corporation may face a 30 per cent fall in revenue this year.”

Similarly, VIMC has little room for manoeuvre because shipping activities are stagnant through significantly falling demand of goods transport to markets, especially Chinese, the EU, and the US. Almost all of its shipping fleet has insufficient work, with no cash flow for debt payment and to cover operation costs.

VIMC’s consolidated revenue is estimated at VND2.22 trillion ($96.5 million) over the past few months, down VND626 billion ($27.2 million) on-year, while its loss is estimated at VND113 billion ($4.9 million). This will increase further if the virus continues to the fourth quarter.

Escaping the impasse

The CMSC proposes the Ministry of Industry and Trade to exempt import duty and environmental tax in 2020 for some products such as oil for Vietnam Airlines, VIMC, and VNR, and to levy no import duty for spare parts and equipment that Vietnam has yet to manufacture for ship repair and maintenance.

The agency also urges the Ministry of Finance (MoF) and the State Bank of Vietnam to extend the lending term for credit contracts without a fine on late payment, to restructure debt repayment period, and to continue to lend working capital for VNR and Vietnam Airlines to ensure their operation.

The commission also proposes the MoF to consider cutting VAT and corporate income tax rates, and delaying tax payment for the giants.

In addition, the MoF proposes to work with the MoT on fee reduction for VNR, as well as fees for taking off, landing, and flight control for Vietnam Airlines, and fees in infrastructure use and public services at seaports for VIMC.

The MoF will also allow VEC to use tolls collected from projects to pay for contractors of the Noi Bai-Lao Cai expressway, dealing with problems related to resources for the Ben Luc-Long Thanh expressway, and arranging funding as a substitution for loans from the World Bank for the Danang-Quang Ngai expressway.

The prime minister has approved the investment proposal for the establishment of Vietravel Airlines owned by tourism industry leader Vietravel Group. Expected to take off in the next 10 months, the newcomer will heat up competition in the market which now has five players.

Industry insiders are raising doubts over the success of the new group as many precursors such as Air Mekong and Hai Au failed to perform.

By the end of last year, Vietnam Airlines had 33.3 per cent market share. Jetstar Pacific and VASCO respectively held market shares of 10.6 and 1.6 per cent. Vietjet held 42.2 per cent, and Bamboo Airways attained 12.3 per cent.

By Bich Thuy

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