VietNamNet Bridge - The Vietnam Airlines Corporation (VNA), the national flag air carrier, has asked for permission to contribute capital to set up a new carrier under the mode of a joint stock company. 

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Under the plan designed by VNA, the Vietnam Air Service Company (VASCO), one of its subsidiaries, would be developed into an independent air carrier to operate as a joint stock company.

The air service provider has an AOC (air operator’s certificate) granted by the Civil Aviation Authority of Vietnam (CAAV). After Vietnam Airlines is equitized, Vasco will undergo restructuring. 

In a document sent to the Ministry of Transport, VNA said while compiling the plan on Vasco restructuring, VNA received a proposal from Techcombank, a large commercial bank, on the bank’s capital contribution to become a shareholder of Vasco. 

Under the plan designed by VNA, the Vietnam Air Service Company (VASCO), one of its subsidiaries, would be developed into an independent air carrier to operate as a joint stock company.

This made VNA think that it would be better to establish a new company to operate as joint stock company, rather than the one-member limited company as initially planned.

According to VNA, if Vasco operates as a joint stock company, it would have higher capability in mobilizing capital through share and bond issuance. Meanwhile, the model of a joint stock company proves to be better for Vasco.

VNA said Vasco would have charter capital of VND300 billion, to which VNA would contribute 51 percent. Meanwhile, Techcombank Capital, a subsidiary of Techcombank, would contribute 48 percent and Techcomdeveloper 1 percent.

VNA would make capital contribution with existing assets being managed by Vasco, including the ATR 72 fleet, parts and accessories and standby engines, while the other two shareholders would contribute cash.

VNA emphasized that the new Vasco, if it is established, will be a ‘new air carrier’.

Some experts commented that they can see no change in Vasco’s fleet. The only news is that there will be two more shareholders. Meanwhile, Vietnam Airlines will still be the largest shareholder with controlling stakes (51 percent).

If the business proposal gets approval, Vasco JSC would become operational in the second quarter of 2016 with five existing aircrafts and 187 flying hours a month to four destinations.

While VNA affirmed that the establishment of a new air carrier is ‘necessary’ and ‘effective’, Phap luat Viet Nam commented that the financial plan drawn by Vietnam Airlines is ‘unconvincing’ and ‘strange’.

Vietnam Airlines, talking about the investment efficiency of the deal, gave a surprisingly low figure of VND1.949 trillion for 2016-2018. Meanwhile, investors understand that if they deposit money at banks, they would get much higher profit.

Phap Luat has also raised a question about whether Vietnam Airlines’ capital contribution to Vasco could be seen as an investment deal in non-core business field, which is not allowed now.

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