Airline industry at breaking point as COVID-19 pandemic strikes again

Vietnam’s airline industry is facing its worst crisis yet amid the COVID-19 pandemic, an online conference on financial solutions to keep the industry afloat heard recently.

General Secretary of the Vietnam Banks Association Nguyen Quoc Hung said the industry's rapid growth in recent years had made air travel domestically and internationally a lot more accessible and affordable to the general public. Aside from the national flag carrier, Vietnam Airlines, other companies including Vietjet Air and Bamboo Airways had also made great contributions to the industry's development. 

The industry, however, was among the hardest-hit by the pandemic as many cities and provinces across the country had started implementing social distancing measures and had placed restrictions on travel, Hung noted.  

After two years of struggling to cope, most if not all, companies in the industry were experiencing great difficulty to maintain a healthy cash flow, to a point that it would be extremely difficult for companies to cover their expenses and they might be forced to shut down, he added.

Despite support from the Government, the fourth outbreak of the virus might well be the straw that breaks the camel's back. In addition, government support had not fully reached private companies in the industry. 

Meanwhile, the lack of viable business and operation plans during the pandemic had made it near impossible for airline companies to secure desperately needed cash from banks. 

Hung said as airline companies scaled back on their operations given the extremely low demand for air travel, most banks would have to say no to their loan requests.

"What we need right now is a legal imperative to rescue the industry, for example, a National Assembly resolution on the matter. Meanwhile,  the Government must step up its efforts to roll out support measures, especially for privately-held companies," he said.

"The banking sector has the money to help. The issue here is the lack of guidance to bring airline companies and banks together," Hung noted.

Nguyen Khac Quoc Bao, head of HCM City University of Economics Faculty of Finance said as there was no end in sight for the pandemic companies must brace for further hardship down the road. 

"Without ample support, companies will face liquidity risk and even financial ruin. Should we leave it unaddressed, the heavy cost to restructure the industry in the near future is expected," Bao stressed. 

Can Van Luc, chief economist of the Bank for Investment and Development of Vietnam (BIDV) said support measures must be deployed among airline companies in a flexible and fair-to-all manner.

"The Government should consider giving out loans to privately-held companies at an interest rate of 3-4% lower than commercial loans for up to two years. Further cutbacks on fees and taxes on top of those included in the Government's current support scheme for the industry should also be considered," Luc said.

Bui Doan Ne, Vice Chairman and General Secretary of Vietnam Aviation Business Association said the association had made a number of proposals to the Government on how to ease international travel restrictions including a system of vaccine passports and shorter quarantine periods for those who have received two doses of COVID-19 vaccine.

"We have pleaded with the government to reduce the environment tax up to 70% by the end of June next year on top of cutbacks on service fees to use airports and income tax for airline companies," he added. 

The association has also made a request to the Ministry of Planning and Investment and the National Assembly to consider a capital injection of up to VND6 trillion (US$260 million) for 12 months with extensions.

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