The aviation industry is firing on all cylinders after the pandemic. Photo: VNA.

Domestic airlines recover gradually, international remain sluggis

Assessing the aviation market after 2 pandemic- hit years, Director of the Civil Aviation Authority of Vietnam Dinh Viet Thang said that in the two years 2020-2021, the Vietnamese aviation market dropped sharply with the reductions of 42.1% and 80% respectively compared to 2019. Vietnamese airlines have to struggle, manage and implement all self-advocating solutions as well as ask for supports from the State management agencies to maintain operations.

In 2022, thanks the relaxation of measures to prevent and control the Covid-19 epidemic which achieved remarkably positive results, the market has shown signs of recovery, but only in the domestic market. In contrast, the international market (accounting more than 60% of revenue for firms) still faces many difficulties to achieve the level before the epidemic in 2019. So far, although most international routes have been restored, key markets, accounting for a large proportion of passengers such as China, Japan, and South Korea still maintain restrictive policies on immigration and strict measures to prevent and control the pandemic.

Not to mention, after two years of fighting the pandemic, businesses in the aviation industry, especially Vietnamese airlines, are struggling to mobilize enough financial resources and cash flow to maintain operations. Along with that, after a long time of staying stable at a low level, the oil price has continuously escalated over the past time and has not shown any signs of lowering, which has put pressure on airlines in particular and the aviation industry in general”, emphasized the Director of the Civil Aviation Authority of Vietnam.

Assessing the prospect of aviation development, economic expert, Prof. Tran Tho Dat said, the development prospect of Vietnam's aviation at present and in the coming time is quite clear, which is likely to be the leading field of the recover wave with a series of domestic and international routes being restored and expanded.

Need special support market

To recover and develop the aviation industry in the new context, Prof. Tran Tho Dat suggested that the State Bank should speed up the credit support package for businesses. From the point of view of fairness and efficiency, aviation, tourism and a number of related service industries should be offered loans with preferential interest rates and within the minimum of 2-3 years to revive the two industries that were most affected.

At the same time, the Government should consider reducing some costs to partially limit the impact of the gasoline and jet fuel price escalation, including: reducing import tax rates on aviation fuel; removing some constraints on price policy by adjusting the ceiling price of air tickets; allowing airlines to surcharge fuel for domestic flights; and supporting airline service prices. On the part of airlines, it is also necessary to proactively have solutions to overcome and adapt flexibly.

Sharing the same view as the need to continue to support airlines in recovering from the pandemic, Dr. Nguyen Duc Kien, Head of the Prime Minister's Economic Advisory Group, said that support can be divided into three groups: general support programs for businesses in the industry; support program for pandemic-hit ones and the; support program for a few state-owned enterprises. These solutions deal with urgent problems to avoid the risk of bankruptcy, to overcome the crisis to long-term and others to restructure businesses after the epidemic. Solutions are often applied synchronously and consistently, rather than separately. For example, loans or loan guarantees belonging to the first two groups of solutions often come with provisions on debt-for-equity swaps and commitments on environmental protection, restrictions on dividend payments, executive compensation...

For example, Dr. Nguyen Duc Kien said that in Singapore, the national carrier Singapore Airline, with the majority of shares owned by Temasek, issued S$8.2 billion in shares and S$3.4 billion in convertible bonds. Temasek, as a representative of state ownership, participated in buying shares on the market to maintain its ownership ratio, and committed to be a buyer of bonds if the issuance was unsuccessful.

Besides, Dr. Nguyen Duc Kien also suggested that it is necessary to develop a master plan to restructure the aviation industry (including airlines and airport corporations) to solve the current difficulties resulting from the international context as well as restructuring issues. The Ministry of Planning and Investment and the Ministry of Finance need to closely coordinate to review the applied mechanisms and policies and inadequacies to submit to the Government for solutions to support the development of the aviation industry in the new situation. In particular, the Ministry of Finance needs to study, draft and propose plans to amend a number of articles of the Law on Securities and the Law on Management and use of state capital to invest in production and business at enterprises, along with the simplified procedures and orders mentioned at the National Assembly session in October 2022.

Given the Committee for State Capital Management at Enterprises, Dr. Nguyen Duc Kien said that this agency must take the initiative with Vietnam Airlines and the Airports Corporation of Vietnam (ACV) as the owner's representative to build a restructuring program in a timely manner, not to miss the deadline and appoint a person with specific responsibility to submit it to the Government and Prime Minister for consideration and decision.

At the same time, the Capital Management Committee also needs to study the plan allowing economic groups and corporations under its management to syndicate capital to invest in aviation infrastructure and airlines as a capital management organization without wearing down the assigned state capital.