Vietnam Airlines’ IPO is all set to take to the air this year

The government last week approved  Vietnam Airlines’ restructuring plan for 2012-2015.

Accordingly, the state will decrease its stake in the airline to 65-75 per cent after its initial public offering (IPO) this year.

In the initial draft restructuring plan Vietnam Airlines submitted to the Ministry of Transport (MoT) last April, the airline proposed a 70-80 per cent stake to be held by the state.

Based on the capital demand, the airline will issue shares to mobilise capital to ensure the state ratio stays at 65-75 per cent of its charter capital now at VND8.94 trillion ($429.8 million).

According to the MoT, the change will bring the airline in line with the country’s state-owned enterprises (SOEs), as other transport sector businesses are undergoing similar restructuring.

This month, Vietnam Airlines submitted a list of selected advisers for its IPO to the MoT for approval which included Citigroup, Morgan Stanley and some other Vietnamese sub-contractors.

It expects to raise $200 million via this IPO, as the state giant evaluates its equity to reach VND14 trillion ($673.1 million) in 2013 and reach VND21 trillion ($1 billion) in 2015. Under the plan, apart from the mother corporation, which includes nine member companies, the restructured Vietnam Airlines will consist of 26 independently audited companies.

The mother corporation will hold a 100 per cent stake in Vietnam Airlines Engineering Company (VAECO) only, while owning half of the registered capital of 14 companies and less than 50 per cent of registered capital in the 11 remaining companies.

As expected after completing restructuring, Vietnam Airlines will comprise four airlines namely the mother corporation, VASCO, Jetstar Pacific and Cambodia Angkor Air.

By late 2015, Vietnam Airlines is expected to completely divest its capital from non-core businesses with a view to improving its business performance. Specifically, 10 names the airline will withdraw capital from include Techcombank, Bao Minh Corporation, France Telecom, Saigon Post and Telecommunications Service Company.

Vietnam Airlines’ total annual revenue reached VND50.89 trillion ($2.4 billion) in 2012, surging 6.3 per cent on-year. The airline also saw profits of VND69.8 billion ($3.3 million), up 239 per cent.

In the next eight years, the airline, which now controls 69.7 per cent of the domestic aviation market, plans to reach revenue from air transport of $43.8 billion with a pre-tax profit of more than $1 billion.