Indochina Airlines’ bankruptcy suspicions expand

There are even more signs showing that Indochina Airlines, the air carrier owned by musician Ha Dung, is going bankrupt, revealed Vo Huy Cuong, Head of the Air Transport Division under the Civil Aviation Authority of Vietnam (CAAV).

“It is unclear if Indochina Airlines wishes to continue flying, however, even if the company decides to go ahead, it will be very difficult to continue operation. I personally think that there are signs that Indochina Airlines is going bankrupt,” Cuong commented in a VietNamNet interview.

VietNamNet: Indochina Airlines has stopped providing flights and is bogged down with debts. Will it have its operations license revoked?

Vo Huy Cuong: I have to admit that even CAAV does not know how to contact Indochina Airlines now. All documents and dispatches sent to registered office addresses have been returned. I myself cannot contact Indochina Airlines’ officials.

If the situation cannot be improved, the air carrier will have its operations license revoked on May 31, 2010, because it is not able to maintain its operations. CAAV has not made any official comment, but I personally think that there’s every sign of Indochina Airlines going bankrupt.

VietNamNet: In 2009, the domestic aviation market developed well despite the global economic crisis. What reasons explain the heavy losses of Indochina Airlines then? Is it bad management, low capital, or lack of experience?

Cuong: There are many reasons for the poor operation of Indochina Airlines. First of all, capital is short. Under current law, investors must have at least 200 billion dong in chartered capital to obtain a license. Airlines must not only meet this requirement, but they also have to increase their capital during operation. Indochina Airlines could not do this.

Secondly, it is true that the domestic aviation market grew well in 2009, but Indochina Airlines faced stiff competition. Other airlines launched big promotional campaigns, offering big airfare discounts, which made Indochina’s turnover decrease. On the Hanoi-HCM City air route alone, other air carriers provide nearly 20 flights per day. A 10 percent airfare cut would be big enough to lure all customers away.

Meanwhile, the air carrier has to use foreign services, from chartering aircraft and hiring pilots to in-land services. The depreciation of the dong was a big problem for the airline when it had to spend more dong to purchase dollars to pay its foreign partners.

Experience and management are also issues. Maybe they can gather many good experts, but they do not match up well. And the airline was not doing well in marketing and advertising.

VietNamNet: It seems that Indochina Airline was too hasty to ‘take off’ when it had not prepared well for its flights?

Cuong: It was quite normal for the airline to have 200 billion dong in chartered capital when it began providing flights

At first, we thought that Indochina Airlines had many positive elements. There were few rivals on the market and it was cheap to charter aircrafts at that time due to the global crisis. The market welcomed new air carriers.

I flew with Indochina Airlines once. I think that the staff was well-trained, and in general, the service quality was good and professional.

VietNamNet: Do you think that we should learn lessons from Indochina Airlines, meaning that the required chartered capital of 200 billion dong is reasonable?

Cuong: The sum of 200 billion dong is just the capital required by the State, through which investors show their financial capability. They also need to have fixed assets and accounts at banks

I think that it is reasonable to require 200 billion dong, which is enough in the initial period for an air carrier to fly with one or two aircrafts.

VietNamNet: How will the existing problems such as paying booking agents and staff be resolved when the airline falls into insolvency?

Cuong: If Indochina Airline goes bankrupt or falls into insolvency and cannot fulfill its signed contracts, its partners can bring the case to the courts.

Vietnamnet

Tags: Indochina Airlines, Vietnam aviation