Covid causes more turbulence for Pacific Airlines
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The Covid-19 pandemic stopped Pacific Airlines’ recovery and worsened its financial situation, which is “extremely serious,” its parent company, Vietnam Airlines, informed shareholders last week.
“The shortfall in cash flow and large overdue debts pose the possibilities of insolvency and termination of operations,” the carrier said, adding that it is seeking investors to restructure Pacific.
In 2018 and 2019, the airlines was on course to recover with profits of VND34.3 billion ($1.48 million) and VND48.6 billion against losses of VND346 billion and VND907 billion the previous two years.
Its revenues peaked at VND8-9 trillion during the period.
It posted profits of VND150 billion in January 2020, a monthly record, before Covid-19 hit the aviation industry.
“If it weren’t for Covid-19, we would have made a big profit,” its chairman and Vietnam Airlines’ deputy director, Trinh Hong Quang, had said in mid-2020.
That year the budget carrier ended up with a record loss of VND2.14 trillion as revenues plummeted to VND2.6 trillion, a fourth of the previous year’s figure.
At the end of 2020 it had total assets of over VND6.6 trillion, but its equity had eroded and was in the red.
In 2021, it lost nearly VND2.31 trillion. Speaking about plans to restructure its subsidiary, Vietnam Airlines said the investor selection process faced legal and other obstacles due to the fact it is a state-owned enterprise.
If no agreement is reached, its own situation would be at risk, it warned.
It plans to seek shareholders’ approval to amend a clause in its charter to allow sale of its equity to third parties at the upcoming annual general meeting.
Pacific Airlines was founded over 30 years ago after authorities approved foreign investment in the aviation industry. As a budget airline, it was expected to increase Vietnam Airlines’ penetration and competitiveness.
Vietnam Airlines owns 98 percent of the carrier, including 30 percent it got back from Australian airline Qantas in 2020.
Questions & Answers
Q.What was Pacific Airlines’ financial trajectory before the pandemic hit?
What was Pacific Airlines’ financial trajectory before the pandemic hit?
The airline was recovering, posting profits of VND34.3 billion in 2018 and VND48.6 billion in 2019, following significant losses in the two preceding years. Revenues during this period peaked at VND8-9 trillion annually.
Q.What is the primary reason Vietnam Airlines faces difficulties restructuring Pacific Airlines?
What is the primary reason Vietnam Airlines faces difficulties restructuring Pacific Airlines?
Vietnam Airlines stated that the investor selection process for its subsidiary faces legal and other obstacles. These issues arise because Pacific Airlines is a state-owned enterprise, complicating potential agreements.
Q.How did Covid-19 impact Pacific Airlines’ financial performance in 2020?
How did Covid-19 impact Pacific Airlines’ financial performance in 2020?
The budget carrier recorded a record loss of VND2.14 trillion in 2020, with revenues plummeting to VND2.6 trillion. This figure was a quarter of the revenue earned the previous year.
Q.What step is Vietnam Airlines taking to facilitate the sale of Pacific Airlines’ equity?
What step is Vietnam Airlines taking to facilitate the sale of Pacific Airlines’ equity?
Vietnam Airlines plans to seek shareholders’ approval to amend a clause in its charter. This amendment would allow the sale of its equity in Pacific Airlines to third parties at an upcoming annual general meeting.
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