Vietnamese airlines face bankruptcy risk due to COVID-19

Vietnam Airlines is struggling because of the COVID-19 pandemic.

On August 24, the Vietnam Aviation Business Association (Vaba) announced that due to Covid-19, revenue of its airlines members decreased by 80-90%, cash flow was severely short, principal and interest debt increased. This situation puts the airline business on the brink of bankruptcy and requires urgent support. Vietnam’s state-controlled media reported citing Vaba’s document to the Governor of the State Bank of Vietnam to request support for Vietnamese airlines.

General Secretary of the Vietnam Aviation Business Association, Mr. Bui Doan Ne, told the press that since the fourth outbreak of COVID-19 in Vietnam until now, airlines have fallen into a dangerous situation as their revenues decreased by 90%, principal and interest increased while the assets and financial reserves of the firms were exhausted, the opportunity to access loans was very difficult, leading to a high risk of bankruptcy.

Vaba proposed the State Bank of Vietnam to restructure the repayment term, exempt and reduce interest and fees, and exempt and reduce interest on groups of new and payable debts during the outbreak of the disease for both pre- and post-disbursement payments of June 10, 2020.

Difficulties for aviation enterprises due to lack of cash flow to pay for production maintenance, the regulation that only debt restructuring for loans before June 10, 2020 makes short-term loans nearly impossible. If not approved, this puts pressure on businesses to be unable to pay their debts on time, thereby generating bad debts that make it impossible to get new loans to be able to maintain operations.

Vaba proposes to extend the time for restructuring the repayment term from January 23, 2020 to the next day from three months to six months since the Government announced the end of the pandemic. The reason is given because businesses need 3-6 months to stabilize again, while the epidemic has affected throughout 2020 until now and is expected to last at least until the end of 2021.

Vaba proposed the State Bank of Vietnam to consider and issue a mechanism on refinancing so that commercial banks can lend loans to private airlines that have been affected by the pandemic depending on the business size of each airline, with an amount of VND4 trillion-VND5 trillion ($171 million-$214.6 million), with preferential interest rates, the refinancing term is 12 months and can be extended when the impact of the pandemic continues. (Translated)


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