Vietnamese airlines incur huge debts due to Covid-19

The Vietnam Aviation Business Association (VABA) has proposed to the Ministry of Planning and Investment to support local airlines that are suffering from depleted cash flows and increased debts.

The Vietnam Aviation Business Association (VABA) has proposed to the Ministry of Planning and Investment to support local airlines that are suffering from depleted cash flows and increased debts.

  

Vietnamese airlines incur huge debts due to Covid-19

According to VABA, if the aviation industry experienced growth of 2.5%, it would help increase GDP growth by 1%. However, the aviation industry has been badly affected by the Covid-19 pandemic. Prior to the pandemic, airlines were experiencing annual revenue growth of 15-20%. In 2020, the revenue of the local airlines dropped by 60% or about VND100trn (USD4.3bn).

The short-term debts and due debts of Vietnam Airlines, Vietjet Air and Bamboo Airways have reached VND36trn (USD1.5bn). Of which Vietnam Airlines owed VND20trn. In 2021, the Covid-19 outbreaks in Vietnam took place during travel seasons, the Tet Holiday and summer holiday, and dealt huge damage to the airlines. The airlines have spent over VND100bn a day to maintain business while revenue in May and June alone dropped by 90% compared to the same period last year.

"The airlines are running out of cash and loans which are getting harder to access. Governmental policies are still lacking and slow to be implemented," said Bui Doan Ne, vice chairman of VABA. "Therefore, we proposed expanding the credit support programme for aviation firms."

In April, the State Bank of Vietnam provided a re-financing loan of VND4trn (USD173m) to Vietnam Airlines with zero interest rate. VABA then proposed to provide VND5trn or VND6trn re-financing loans to other airlines depending on their role and market share. In addition, VABA also suggested releasing a VND25trn loan package for three to five years to help local airlines recover.

Other suggestions included reducing airport service fees by 50% for passengers and lowering corporate taxes. VABA also supports the vaccine passport programme to reopen international routes as soon as possible.