The People’s Court of Ho Chi Minh City has ruled that bankrupt carrier Indochina Airlines (ICA) has to pay its $1.3 million debt to the Asian Commercial Bank (ACB) following the latter’s lawsuit over a letter of credit guarantee dispute.
 |
| On November 23, 2009, Indochina Airlines had to return the last aircraft to Travel Service Airlines |
The judge panel also decreed that if ICA failed to pay the debt, its CEO Ha Hung Dung, popularly known as music composer Ha Dung, would be held responsible for the debt of $1.19 million plus the interests of $110,000.
Dung has been banned from leaving the country to ensure his fulfillment of the liability.
In October 2008, ICA and ACB inked a contract on credit guarantee, in which ACB would back the private carrier in issuing the deferred payment letter of credit and sight letter of credit.
On January 21, 2010 ACB paid the Czech’s bank Komercni Banka A.S $1.19 million on ICA’s behalf.
ACB then added the sum to the carrier’s account and asked it to clear the debt by April 12, 2010 at the interest rate of 6.5 percent a month. Should ICA fail to pay the debt by the deadline, the interest would subsequently be increased to 9.7 percent, it notified ICA.
However, for months the carrier kept refusing to settle the debt, regardless of the bank’s continuous reminding.
The bank had no choice but to take the carrier to court on September 4, 2010.
At court, ICA’s representative confirmed its $1.3-million debt to ACB, but said it had yet to determine the date to repay the debt due to its financial difficulties. The carrier also asked that the bank reduce the interest rate.
Ha Dung also signed the guarantee letter saying that he would clear the debt of ICA on its behalf if the airline failed to do so, his spokesperson said.
History of the private air carrier
The first private air carrier in Vietnam, ICA was licensed in May 2008 and began its first flight six months after that with two Boeing 737-800 aircrafts leased from the Czech Travel Service Airlines.
Only a year later, on November 1 2009, ICA had to cease its operation due to financial problems. The carrier was then repeatedly prompted for debt repayments as well as facing demands from its creditors to have its license revoked.
On November 23, 2009, it had to return the last aircraft to Travel Service Airlines.
Two months later, its license for operating domestic flights was rescinded by the Civil Aviation Authority of Vietnam (CAAV) because it failed to register the required capital and had no aircrafts for operating. In addition, ICA had not secured any agreements over debt settlements with its creditors.
Last January, ICA’s CEO Ha Dung submitted a petition to the CAAV, asking for a deferment on the revocation of its license till the end of December 2011. He also petitioned the Prime Minister to allow the airline to restructure its capital to return to operation.
In response, CAAV said it would only agree to ICA’s proposal if the carrier could submit detailed business and financial plans, especially plans to settle its debts.
Moreover, CAAV said ICA also had to be able to raise at least VND200 billion of authorized capital and acquired the Air Operator\'s Certificate.
“Should ICA fail to meet the above requirements, it will have the license withdrawn and have to declare bankruptcy,” CAAV said.