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Vietnam Airlines waiting for rescue as debts remain high

Vietnam Airlines is facing the risk of compulsory delisting and its going concern basis depends on financial support from the government and banks’ decisions on debt payment extensions.

According to Deloitte Vietnam, the short-term debts of the national flag air carrier as of the end of the second quarter of the year had exceeded short-term assets.

By that time, Vietnam Airlines had reported stockholder equity of minus VND4.9 trillion, while short-term debts had reached a very high level, nearly VND52.7 trillion, far exceeding its short-term assets (VND16.2 trillion). Overdue payables of Vietnam Airlines had climbed to roughly VND10.5 trillion.

According to Deloitte Vietnam, the air carrier’s ability to operate will depend on the government’s financial support, the banks’ decisions on the extension of payment of bank loans, and payment to suppliers and lessors.

Meanwhile, the HCM City Stock Exchange (HOSE) has warned of the possibility of Vietnam Airlines being forced to delist its shares (HVN) as the carrier has violated all three things, which, if referring to current laws, would be delisted mandatorily.

In principle, the shares of a company are delisted if its production and business results in the last three consecutive years, or the total accumulated losses, exceed the real charter capital, or its stockholder equity is minus as shown in the audited financial report of the latest year.

Vietnam Airlines has seen its accumulated loss reaching VND28.9 trillion ($1.2 billion).

Because of its bad business performance, HVN share prices are on the decrease. At the September 8 trading session, the price of the shares fell to the floor price of VND15,150 per share. As such, in the last six months, the price of the shares has dropped by VND10,000 per share, from VND25,000.

In theory, Vietnam Airlines will recover if it is rescued by the government as it was in 2021, when it fell into a similar situation. At that time, it reported big losses and doubted the ability to operate due to the impact of the Covid-19 pandemic.

In 2021, Vietnam Airlines also reported minus cash flow and it obtained a VND12 trillion bailout that supported its liquidity.

In September 2021, the air carrier issued shares to existing shareholders (the State holds 86 percent of shares) to increase the charter capital by VND8 trillion.

Earlier, the National Assembly and Government agreed to rescue Vietnam Airlines through the State Bank of Vietnam’s refinancing package worth VND4 trillion provided to credit institutions after the institutions provided additional loans to serve the business.

However, some analysts commented that the large-scale package can only help Vietnam Airlines improve its liquidity until early 2022.

Vietnam Airlines has recently accelerated company restructuring by selling assets (airplanes, shares), but it faces difficulties because of legal procedures. Meanwhile, the situation is getting worse as the air fuel price is increasing, leading to higher operating costs. 

Many international air routes have not reopened yet, which explains why tge number of passengers is on the decrease. The number of foreign travelers to Vietnam is still lower than that in the pre-pandemic period.

The possibility of giving second rescue to Vietnam Airlines proves to be more difficult as the Government now has to gather strength to fight inflation, and SBV has to tightly control money supply to the economy amid the record escalation of goods and service prices in the world.

The story about Vietnam Airlines doing business and implementing political tasks has caught special attention from investors.

Vietnam Airlines has completed a plan on restructuring the corporation in 2021-2025, and has reported to shareholders and agencies for approval.

Under the plan, in 2022, Vietnam Airlines would implement three solutions to fix the consolidated loss and minus consolidated stockholder equity.

Vietnam Airlines will improve the air transportation business, effectively use production capacity so as not to push up accumulated losses in the period when the market has not fully recovered, and make profits in the next few years.

The corporation will restructure assets and financial portfolio to increase income and improve cash flow. Under the previous plan, Vietnam Airlines said it would sell or sell and lease back old aircraft, make divestments, and transfer capital of some financial investment portfolios, mainly in 2022-2024.

Vietnam Airlines also said it would make necessary preparations to implement the plan to issue shares to increase stockholder equity once it gets approval from competent agencies.

While Vietnam Airlines is facing big problems, private airline Vietjet Air has released its Q2 financial report with post-tax profits of VND181 billion, raising accumulated profits in H1 to VND426 billion.

Manh Ha

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