Support for domestic airlines should be fair: experts
The Ministry of Transport has proposed the Government increase support for domestic airlines which were heavily hit by the COVID-19 pandemic.
Policies included tax and fee postponements as well as credit support.
The national carrier Vietnam Airlines in which the State holds the controlling stake, was the only airline to get approval from the National Assembly and Government for a loan package worth VND4 trillion with a preferential rate. The rate would be equivalent to the lowest rate of debts that Vietnam Airlines raised in the market and the interest would be paid in stocks.
After Vietnam Airlines received the Government’s support, two private airlines, Vietjet and Bamboo Airways, despite reporting profits in 2020 both called for similar support .
Vietjet proposed a loan package worth VND4-5 trillion with a loan term to 2023 and rate of around 4% interest per year.
Bamboo Airways asked for a loan worth around VND10 trillion. Bamboo expected the Government would raise mechanisms for commercial banks to provide the airline with long-term loan worth VND5 trillion while the rest of VND5 trillion would be provided via refinancing at zero interest rate.
According to Pham The Anh, chief economist of the Vietnam Economic and Policy Research, if the credit support was provided to Vietnam Airlines, similar support should also be provided to other domestic carriers to create a fair playing field, providing they met the same requirements as Vietnam Airlines.
However, Anh said that support for aviation enterprises should be in the form of issuing shares to take advantage of the stock market rather than providing preferential loans which should be considered the last choice.
Can Van Luc, member of the National Financial and Monetary Advisory Council, said that credit support policies must be fair among all carriers.
According to the Vietnam Aviation Business Association, although private carriers reported aggregated profits last year, they all suffered losses in the aviation transportation business, at an estimated sum of more than VND18 trillion in total.
The association predicted the aviation market would continue to have problems this year and that domestic airlines might face losses of more than VND15 trillion coupled with the risk of cash flow exhaustion. Domestic airlines needed the Government’s support, the association said.
Besides new loans with preferential rates, the association also proposed Government reduce rates of existing loans by around 2% together with debt restructuring and payment postponements.
Further cuts on environmental protection tax for fuel was also proposed from VND2,100 per litre to VND900 – VND1,000 till the end of 2021.
