Government to invest $345 million to bail out Vietnam Airlines

The State Capital Investment Corporation said it is in discussions with Vietnam Airlines to invest VND8 trillion ($345.49 million) in the carrier through a rights issue.

It follows a government resolution to resolve the difficulties faced by the airline due to the impact of the Covid-19 pandemic, Nguyen Chi Thanh, general director of the sovereign fund, said at a press conference late last week.

The resolution requires the State Bank of Vietnam to reimburse loans of up to VND4 trillion to credit institutions that have lent to Vietnam Airlines and allow the carrier to make rights issues to existing shareholders to supplement its capital.

Thanh said: “Vietnam Airlines will issue shares worth VND8 trillion to existing shareholders, accounting for 25 percent of the carrier’s charter capital. SCIC, acting on behalf of the Government, plans to buy these shares.”

The government-owned 86.16 percent in Vietnam Airlines on December 31, 2019.

Thanh said the airline is making plans for a rights issue, and SCIC’s task is to determine a reasonable issue price close to the market price and is working with Vietnam Airlines on this.

“In order to do that, Vietnam Airlines must be valued, and this requires at least a five-year business plan if we use the discounted cash flow method.”

The SCIC would appoint a “globally reputed auditing company,” and the latter would identify the most appropriate valuation method possibly within a month, he said.

Vietnam Airlines expects losses of VND12 trillion for 2020 compared to a VND3.37 trillion profit in 2019.

It presently flies an average of 300 flights a day on more than 60 domestic routes. It has resumed flights to Japan, though not from that country, and plans to resume flights soon to mainland China, Taiwan, Laos, and Cambodia.

In November, the National Assembly approved a bailout that could see the carrier get VND12 trillion and allows it to sell more shares to existing shareholders to boost cash reserves.