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MoF plans to offload shares of Pacific Airlines to boost stakes

(27/01/2005 09:27:00)

The Ministry of Finance (MoF) plans to sell 86% of shares of the Pacific Airlines (PA) in the near future in hopes of reviving the failing joint-stock airline.

"Foreign investors might buy a part of the PAs shares," Le Thi Bang Tam, vice-minister of the MoF said.

 

Over the last three years, PA has lost VND 215 billion (US $13.5 million). The carrier began flights in 1991 with a starting capital of VND 39 billion (US $2.47 million).

 

"Capital mobilisation is not a real problem for Pacific Airlines. After renovation and selling shares, 1 believe that capital can increase to 10 to 20 times what it is now.", said Lương Hoài Nam, Director of Pacific Airlines

 

"During 200 1 -2003, the events of September 11, the Iraq war, SARS, avian flu and oil price increases all contributed to PA losing VND 100 billion (US $6.4 million)," Luong The Phuc, head of PAS management board, said.

 

But outside factors are not wholly to blame. Bad business decisions also contributed to the losses. Despite a limited capital, PAs management made a disastrous business decision to open two new international routes (Ho Chi Minh City - Da Nang - Hong Kong and HCM City - Singapore - Ho Chi Minh City) which lost the company a further VND 100 billion.

 

At present, the MoF is setting up a steering committee to solve financial losses of the PA, the countrys second carrier after Vietnam Airlines.

 

Reforming PA will be camed out in two steps. First, an auditor will be hired to define the airlines debt. Second, the MoF will work with lenders to get it on stable financial footing.

 

"It will help the airline return to do business, " Tam added.

 

"Vietnam Airlines, which holds 80% of Pacific Airlines, will transfer all its shares to the MoF when the plan to reform Pacific Air- lines finishes, " Nguyen Xuan Hien, director of Vietnam Airlines said.

 

"Capital mobilisation is not a real problem for Pacific Airlines. After renovation and selling shares, I believe that capital can increase to 10 to 20 times what it is now, " Luong Hoai Nam, director of PA said.

However, the two most important things for the airlines: value of trade-mark and market-share with Vietnam Airlines havent been mentioned yet. (VNS)

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