Vietnam Airlines' lenders get $173-million refinancing loan

The State Bank of Vietnam (SBV), the country’s central bank, has given permission for lenders of the national flag carrier Vietnam Airlines to access a refinancing loan worth VND4 trillion (US$173 million) at a 0% interest rate before December 31, 2021.

Vietnam Airlines receive support from the government to overcome Covid-19 crisis. Photo: Le Thanh

Such interest rate is also applicable for any extension for such loans, if any.

The bailout was materialized through the circular No.04/2021/TT-NHNN issued by the SBV to help the state-owned airline mitigate impacts of the Covid-19 pandemic as stated in a resolution adopted by the National Assembly last year.

Under the circular, the SBV’s refinancing loan is provided for credit institutions without requirement for guarantee assets, while the refinancing period would be upon the request from credit institutions in subject, but would not exceed 364 days, and the extension period is expected to be within 1,092 days.

Meanwhile, Vietnam Airlines, in which the state currently holds an 86.19% stake via the Commission for State Capital Management (CSCM), gets the permission to sell additional shares worth VND8 trillion (US$345.68 million) to existing shareholders to raise its registered capital. As such, the government would assign its investment arm State Capital Investment Corporation (SCIC) to buy Vietnam Airlines shares.

Setting price floor for air ticket

In a recent meeting with the Civil Aviation Authority of Vietnam (CAA), representative of the Vietnam Airlines proposed setting price floor and a hike for price ceiling for air tickets.

Under its proposal, the airline called for raising price ceiling by up to VND250,000 (US$11) for flight distance from 500 – 1,280 kilometers, while the minimum price for flight route of less than 500 kilometers would be VND414,000 (US$18) and up to VND917,000 (US$40) for those from at least 1,280 kilometers.

In another alternative, Vietnam Airlines suggested price ceiling should be at 35% of the price floor, ranging from VND560,000 (US$24.44) for flight of less than 500 kilometers to VND1.4 million (US$61) for over 1,280 kilometers.

If such proposal is materialized, airlines would not be allowed to offer promotion sales of super cheap air ticket or even with VND0.

“The move would help airlines to overcome this difficult period, while prices of air tickets in certain times have reached its bottom,” said the representative.

This is the second time that Vietnam Airlines proposed the use of price floor. In March 2017, the airline called for price floor of VND1.54 million (US$67) and price ceiling of VND4.2 million (US$183.25) for domestic flight routes.

The suggestion, however, met with rejection from the Ministry of Transport and cause heat discussion in the public.

Bao Viet Securities Company (BVSC) in a recent report expected the price for air ticket in 2021 could continue to be cheaper.

In the Covid-19 ravaged year of 2020, Vietnam Airlines posted a pre-tax profit of nearly VND11.1 trillion (US$482 million). The figure was significantly encouraging as the airline  estimated loss of VND14.4 trillion (US$626.3 million).

As the aviation industry was among the hardest-hit sectors by the pandemic, Vietnam Airlines operated around 96,500 flights in 2020, down 48% year-on-year. This resulted in decline of 51% year-on-year in the number of passengers to 14.23 million and a fall of 47% in the amount of cargo for transportation  to 195,000 tons.