Vietnam Airlines has more than VND 4,200 billion in cash and deposits

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By the end of June 2020, Vietnam Airlines had VND 4,249 billion in cash and bank deposits. The board of directors of the company expects that by the end of August, Vietnam Airlines will run out of liquidity and therefore needs urgent State support.

Vietnam Airlines có hơn 4.200 tỉ đồng tiền mặt và tiền gửi - Ảnh 1.

Vietnam Airlines has restored the domestic flight network to the pre-epidemic stage and opened a number of new routes. Artwork: Song Ngoc.

According to the new consolidated financial statements released by Vietnam Airlines Corporation (Vietnam Airlines – Code: HVN), as of June 30, 2020, Vietnam Airlines has VND 2,601 billion in cash and demand deposits; 1,648 billion dong with term deposit.

Thus, the total cash and deposits of Vietnam Airlines at the end of the second quarter was VND 4,249 billion, down 35% compared to the first day of the year.

Net cash flow from operating activities in the last quarter was negative VND 5,371 billion. In contrast, the cash flow from investing activities was VND 2,237 billion and the cash flow from financial activities was positive VND 2,778 billion, therefore, the net cash flow in the period was only VND 356 billion.

At a press conference on June 12, 2020, Chief Accountant Tran Thanh Hien said without support, “By August, Vietnam Airlines will run out of money.” At a conference held on 13/7, General Director Duong Tri Thanh also said: “By the end of August, Vietnam Airlines will be in extremely difficult situation of liquidity”.

Mr. Thanh expects the Government to provide emergency support for liquidity of VND 12,000 billion, either through equity contributions or bank loans.

According to Vietnam Airlines, the Government is the general manager of state-owned and private airlines, but at the same time, the Government is also the largest shareholder contributing 86.2% of Vietnam Airlines capital, so it needs to stand out for this corporation at a difficult time because of the COVID-19 pandemic.

Currently the government has not decided whether to rescue Vietnam Airlines or not and if so, how to rescue them. Vietnam Airlines has three times postponed the date of the annual shareholder meeting in 2020, from June 29 to July 16 to July 28 and the most recent was to August 10.

Vietnam Airlines có hơn 4.200 tỉ đồng tiền mặt và tiền gửi - Ảnh 2.

A Vietnam Airlines aircraft at Noi Bai international airport. Photo: Song Ngoc.

Regarding business results, in the second quarter, Vietnam Airlines recorded a net revenue of VND 5,995 billion, a decrease of 3/4 compared to the same period of 2019, a gross loss of VND 3,874 billion, equivalent to a gross loss margin of 64.6%.

A bright spot is that financial income increased by 133% over the same period to 903 billion dong, most of which were profit from exchange rate difference of 725 billion dong and dividend of 121 billion dong.

After deducting expenses, Vietnam Airlines suffered a loss of VND 4,031 billion in the second quarter of 2020, and the parent company’s shareholders lost VND 3,945 billion. In the same period last year, the company was still profitable.

In the first 6 months of this year, Vietnam Airlines saw a loss of 6,642 billion dong, equivalent to 51% of the plan of 13,000 billion dong of loss for the whole 2020. Net revenue in the first 6 months reached 24,808 billion dong, a half decrease compared to the first half of 2019.

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Freezing and paralysis are the general conditions of global aviation. The International Air Transport Association (IATA) estimates that the world aviation market will need three years to recover to the level of transport in 2019.

After the global financial crisis in 2008, the industry lost about 20 billion USD, then each year profit from 30-40 billion. However, because of COVID-19, this year the global aviation industry is expected to reduce revenue by US $ 419 billion, losing US $ 84 billion. By 2021, the estimated loss is 15 billion USD. IATA estimates that the aviation industry needs governments to support at least US $ 250 billion.