US Company eyes stake in Vietnam's Pacific Airlines
HANOI - An American financial group is seeking to invest in the HoChi Minh City-based Pacific Airlines, Vietnam's sole joint-stock air carrier, local media has reported.
The unidentified US company has proposed that it would pool some US$50 million to re-structure Pacific Airlines and turn it into one of the first low-cost airlines in Vietnam, Sai Gon Giai Phong newspaper reported.
With such an investment, Pacific Airlines' operation could cover domestic and regional routes.
The beleaguered airline has faced difficulties due to huge financial losses in recent years.
According to the carrier's managing director, Luong Hoai Nam, in the 10 years ending 2004, the airline suffered losses of around VND360 billion (US$22.5 million), nine times higher than its initial investment.
Established in 1992 with initial capital of VND40 billion (US$2.5 million), it was initially run by Vietnam Airlines, which owned more than 86 per cent of Pacific Airlines' shares.
In January 2005, the government assigned the Ministry of Finance to deal with the debt and restructure the operations of Pacific Airlines.
In an interview with Tuoi Tre newspaper on April 2006, Nam said this was a task which has not been completed by the Finance Ministry.
To polish its image, in May 2005, Pacific Airlines cut its airfares by 10 per cent for tickets on the Ho Chi Minh City-Hanoi route and by 12.5 per cent on the Ho Chi Minh City-Da Nang route.
The launch of the sales promotion forced Vietnam Airlines to follow suit.
In August 2005, Temasek Holdings of Singapore announced a plan to buy 30 per cent of the shares of Pacific Airlines.
The Finance Ministry at that time also received proposals from aircraft manufacturers, Boeing and Airbus, as well as some large foreign banks who wanted to buy shares in the airline.
But the ministry chose Temasek, reasoning that the State financial company had experience as it manages the Singaporean governmentas investment capital in joint-stock firms in the field of aviation, transport, telecommunications and real estate. However, the plan has never been realised.
The US financial group also hoped that its investment could help turn Pacific Airlines into a low-cost airline in Vietnam.
This was proposed by its stock-holders when Pacific Airlines was reshuffled in January 2005.
The US company would like to see Pacific Airlines' services cover domestic and regional routes.
In the last two years, low-cost airlines from neighbouring countries such as Singapore's Tiger Airways, Malaysia's AirAsia, Indonesia's Lion Air, and Thailand's Thai AirAsia, have opened services to big cities in Vietnam.
Under a plan mapped out by the US company, the airlines' fleet would be expanded to 20 airplanes, comprising Boeing 737s and Airbus 320s after five year's operation.
According to the plan, Pacific Airlines could become profitable three years after the reshuffle.
Sai Gon Giai Phong said after three years Pacific Airlines could issue stocks in the local securities market for capital expansion.
Vietnam News Agency - July 25, 2006
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