Government approves loan repayment extension for carrier to avoid insolvency risk
PUBLISHED : 29 Jun 2024 at 17:33
The National Assembly in Hanoi has approved an extension for Vietnam Airlines’ 4 trillion dong ($157 million) in state-backed loans through July 2027 to give the financially struggling national carrier time to reorganise its operations, according to information from the parliament.
The airline was at risk of insolvency without the extension, according to a statement posted earlier this week on the National Assembly’s website.
The carrier had yet to complete refinancing efforts, such as restructuring non-core investments and sales of new shares, due to delays in regulatory approvals, according to the statement.
Parliament ordered the Commission for the Management of State Capital at Enterprises, relevant authorities and Vietnam Airlines “to work on a comprehensive development strategy and soon finalise measures to deal with the carrier’s difficulties so that it can recover and restructure”, the legislature’s chief administrator Bui Van Cuong told delegates at the closing session on Saturday.
Like most carriers, Vietnam Airlines struggled through the Covid-19 pandemic, which “had much more complicated impact and lasted longer than forecast, causing extremely severe consequences for the airline”, the government said in a statement.
The carrier received 4 trillion dong in low-cost loans from commercial banks that were refinanced at zero interest by the central bank in 2021.
Vietnam Airlines is targeting after-tax profit of 4.2 trillion dong this year after trimming its loss by half in 2023, according to an emailed statement from the airline. The company reported a net loss of 10.4 trillion dong in 2022.
In December, the airline said cumulative losses over three straight years totalled more than 35 trillion dong, the newspaper Tuoi Tre reported.
The company will focus on restructuring its assets, capital, investment portfolio and organisational structure as well as corporate governance reforms, chairman Dang Ngoc Hoa said in a statement on June 24.