Vietnam Airlines to Receive $ 174 Million in Bank Assistance

0


The Vietnamese national carrier Vietnam Airlines will receive a total of 4000 billion dong (174.8 million dollars) from three Vietnamese banks. The airline is struggling to cope with the financial impact of the ongoing pandemic. The loan will be used to keep the airline from going bankrupt, but that may not be enough.

Vietnam Airlines has been offered a loan from three Vietnamese banks. Photo: Airbus

According to information released by Reuters today, three banks will lend interest-free loans over the next month. The three banks are Vietnam Maritime Commercial Joint Stock Bank, Saigon – Hanoi Commercial Joint Stock Bank and SeABank.

In total, the three banks will remit 4000 billion Vietnamese dong (174.8 million dollars) to save Vietnam Airlines from bankruptcy. While that may sound like a lot, the airline posted a net loss for the first quarter of this year of just under 5,000 billion dong ($ 217 million). So this loan amount will not even cover the first trimester.

According to experts from the Vietnamese Ministry of Planning and Investment, the airline could register a net loss of 10,000 billion dong (435 million dollars) for the first half of the year.

Raising capital

With losses this huge, the airline needs more than a loan to get back on its feet. The plan is for the airline to raise its own capital by issuing new shares to its current shareholders before the end of the year.

Vietnam Airlines to Receive $ 174 Million in Bank Assistance
Vietnam Airlines will sell 11 of its older A321s to increase cash flow and pay off debts. Photo: Airbus

In addition, Vietnam Airlines announced earlier this month that it would sell 11 Airbus A321s to help improve cash flow issues. Although the airline has said it is selling the plane to modernize its fleet, there is no doubt that financial issues have a lot to do with the move. The planes for sale are a little over 12 years old.

The banks’ decision to lend the airline money is somewhat surprising to some. In recent weeks, reports have suggested that banks are unwilling to lend the airline money. According to local media Dealstreetasia.com, the airline was behind on repayments and creditors considered legal action to force the airline to pay.

Vietnam Airlines to Receive $ 174 Million in Bank Assistance
The Vietnamese government owns an 86% stake in the airline. The government also helps finance the banks. Photo: Airbus

There is a chance that the banks have changed their minds by the Vietnamese government. The government owns 86% of the airline. The government had promised a bailout to commercial banks but was slow to pay.

Banks have called on the government to restructure debt payments and change interest charges to help support banks and other businesses. The result is that the government owned airline is backed by banks which themselves depend on government loans.

Currently, Vietnam Airlines’ concerns are closely linked to the ongoing COVID-19 outbreak. It looks like the airline won’t recover until the number of cases goes down. Sadly, cases are on the rise in Vietnam. Bank loans may not be enough to set the airline back until it can dig up planes and return to a regular schedule.

What do you think of the situation of Vietnam Airlines? Do you think the airline can recover? Let us know your thoughts in the comments.


Share.

Comments are closed.