The equitization and IPO of Vietnam Airlines has caught the special attention from the public. All investors will consider the opportunities to own the stakes of Vietnam Airlines, which is holding the biggest domestic market share.

How much is Vietnam Airlines worth ?

In April 2011, Vietnam Airlines offered the consultancy bidding package to 8 international investment banks with the bid package value of up to $3.9 million.

Nhip cau dau tu has quoted its sources as saying that the air carrier has finally chosen some big guys for the final round. They include Citigroup, Morgan Stanley and a domestic firm.

No official information about the enterprise assessment has been released. However, a source from the Ministry of Transport said after completing the equitization of the holding company, Vietnam Airlines’ stockholder equity in 2013 would be roughly VND14.4 trillion, or $680 million, which is expected to reach VND21.3 trillion, or $1 billion by 2015.

According to the US-based Interbrand, the three regional leading air carriers Garuda Indonesia, Malaysia Airlines and Thai Airways International would have the stockholder equity of $1.38 billion, $1.66 and $2.08 billion, respectively, in 2012.

As such, in order to fulfill its ambitious plan to become the second biggest airline in the region by 2020, Vietnam Airlines has to gear up with its development plan, right now.

Vietnam Airlines share potential buyers

Dang Quyet Tien, Deputy Head of the Corporate Finance Department under the Ministry of Finance, said the biggest challenge for Vietnam Airlines now is to find suitable strategic shareholders.

The candidates must be the ones who can satisfy two requirements. First, they need to be financially powerful. Second, they need to have great achievements in the aviation sector.

The national flag air carrier has also revealed that it expects to collect no less than $200 million from the IPO (initial public offering).

Analysts say only foreign investors can satisfy both the requirements, but they have doubts about the attractiveness of Vietnam Airlines’ stakes in the eyes of foreigners.

On February 21, 2012, Vietnam Airlines officially took over the budget airline Jetstar Pacific. The move has helped it increase the domestic market share to 80 percent. However, in return, Vietnam Airlines has to take over the $10 million per annum loss of Jetstar Pacific.

Vietnam Airlines has become less attractive in the eyes of foreign investors as it has just lowered a series of business targets. The air carrier has just asked for the Ministry of Transport’s permission to lower the post-tax profit in 2012 to VND69 billion, or VND300 billion lower than the initially targeted level. The total turnover has also been lowered by VND2.4 trillion.

Explaining this, Pham Viet Thanh, President of Vietnam Airlines, said lowering the targets is unavoidable. In the first five months of 2012, it could only fulfill 38.7 percent of the yearly business plan.

While the domestic demand has decreased in the economic downturn, the appearance of the new comer Vietjet Air, which has held 16 percent of the domestic market share just after one year of providing commercial flights, has shaken Vietnam Airlines’ dominance on key air routes.

The rates of return on equity and rate of return on turnover of Vietnam Airlines are very low: 0.73 and 0.13 percent.

Nhip Cau Dau Tu - March 22, 2013