Government proposes $157 mln payment deferral for Vietnam Airlines

The Vietnamese government on Tuesday asked lawmakers to consider deferring a repayment of VND4 trillion ($157 million) in loans for state-controlled Vietnam Airlines to ease its financial difficulties.

The loans came from a refinancing package from the State Bank of Vietnam to credit institutions for the national flag carrier.

Presenting the proposal at the ongoing session of the National Assembly, the legislature of Vietnam, Deputy Prime Minister Le Thanh Long said from July 23, 2021 to December 24, 2021, on the basis of credit contracts signed with credit institutions, Vietnam Airlines, listed on the Ho Chi Minh Stock Exchange (HoSE) as HVN, had completed the use of the loan package.

The loans were disbursed by credit institutions based on invoices and documents and direct transfers to suppliers’ accounts, he said, adding credit institutions that lent to Vietnam Airlines have been refinanced by the State Bank of Vietnam with an amount equivalent to the disbursement value.

According to the official, as of December 31, 2023, Vietnam Airlines had paid all of the VND220 billion ($8.64 million) loan interest to credit institutions. According to the National Assembly's Resolution and credit contracts, from July to December 2024, the carrier is obligated to pay the entire loan principal.

However, during the implementation process, many new problems and difficulties arose, so Vietnam Airlines could not repay the refinancing package on time, he stated.

By the end of 2024, the equity of the parent company Vietnam Airlines and the consolidated capital were negative VND8,237 billion ($323.6 million) and VND13,108 billion ($515 million), respectively. Its short-term loans, including those from the refinancing package, and overdue debt were at high levels. Of which, many refinancing loans will be due this year.

In addition, Vietnam Airlines' cash flow in 2024 has continued to run in a deficit. Its asset and investment portfolio restructuring solutions have not been implemented on schedule, so the carrier will be unable to repay the refinancing loans on time.

Therefore, Long said the government proposes to allow SBV to automatically extend the repayment three more times for the remaining outstanding refinancing loans.

Each extension period will be equal to the first refinancing term, with the total duration not exceeding five years, an interest rate of 0% per year, and no collateral, he added.

Presenting a verification report, Vu Hong Thanh, Chairman of the National Assembly's Economic Committee - the verification agency, said his committee basically agreed with the need to extend the repayment to remove difficulties for Vietnam Airlines.

“Given the current situation of the airline, support measures are needed to help it overcome difficulties and continue to affirm its role as the national flag carrier, and to preserve the state capital invested in this enterprise,” he said.

However, Vietnam Airlines will still have to ensure conditions to access loans from credit institutions and fulfill its repayment obligations, so the extension will help balance cash flow as well as provide more time for Vietnam Airlines to restructure its operations comprehensively, he noted.

To further clarify the feasibility and effectiveness of the plan, the Economic Committee requested the government to more clearly analyze Vietnam Airlines' debt repayment ability, forecast potential risks, and devise response scenarios and corresponding risk mitigation plans for the carrier’s operations.

At its 2024 AGM on July 21, Vietnam Airlines said it targeted VND4.52 trillion ($177.67 million) in 2024 pre-tax profit, marking a significant turnaround from the carrier's 2023 loss of VND5.36 trillion ($210.6 million) and nearly double the VND2.53 trillion it achieved in pre-pandemic 2019.

It also aimed for VND105.94 trillion ($4.16 billion) in consolidated revenue this year, up 13.6% year-on-year.

Vietnam Airlines is set to record 22.64 million passenger arrivals this year, up 7.6% year-on-year and just 1% lower than in pre-pandemic 2019. Of this, the number of foreign passengers targeted is 7.64 million, up 120.2% year-on-year, but down 15.6% from 2019. Meanwhile, domestic air traffic numbers will be set at 15 million, up 2.2% year-on-year and 8.7% over 2019.

On the stock market, HVN closed Tuesday at VND34,000 ($1.34) per share.