In order to keep
periodic engine maintenance and implement the plan to charter and purchase more
aircraft, Jetstar Pacific (JPA) needs some 55-60 million dollars. JPA commits
to pay all the debts to Vinapco prior to July 31, said Le Song Lai, General
Director of JPA, who is also the Deputy General Director of the powerful State
Investment Capital Corporation (SCIC) which specializes in making investment in
enterprises with state’s capital.

The budget
airline Jetstar Pacific has been reportedly meeting big financial difficulties,
unable to pay for fuel and cover other expenses, VietNamNet’s Vietnam Economic
Forum talked with Le Song Lai to clarify the issue.

Could you please tell us about the
business performance of JPA in 2010, and in the first months of the year? How
have the happenings in Vietnam
and in the world affected the airline’s operation?

In the
whole year of 2010 and the first five months of 2011, domestic airlines, including
JPA, have been facing a lot of serious difficulties and challenges.

As you may
know, fuel always accounts for a big proportion, up to 50 percent, in the total
expenses of JPA. Therefore, any fuel price fluctuations would influence the air
carrier’s business. In 2010, JPA’s fuel expenses increased by 8.6 million
dollars, or 21.5 percent, since the world’s oil price increased by 30 percent
on average.

Meanwhile,
the Vietnam
dong has been depreciating against the dollar. In 2010, the dollar value increased
by 14 percent over 2009, bringing the loss of 8 million dollars to the airline.
Besides, the two-digit inflation and the sharp increases of charges and fees
have also badly affected JPA’s business.

While the
input costs increased significantly, airlines cannot raise the airfares. Though
the airfare ceiling has been raised since April 2010, the current airfares are
still much lower than the actual expenses. I know that all domestic airlines
incurred losses on domestic air routes in 2010.

The
situation has not been improved in the last five months, but it has even become
worse, since the oil price stays firmly at high level of over 100 dollars per
barrel due to the political uncertainties in the Gulf and North
Africa.

As far as I know, JPA plans to purchase
new engines and restructure business, which is believed to lead to financial
problems. Could you please collaborate on this?

JPA plans
to have five engines periodically maintained in 2011, which will cost over 10
million dollars. Besides, it will have to pay deposit to charter 10 A320s with
the initial sum of 20 million dollars.

The air
carrier is well preparing for the expansion of some international and domestic
air routes which will be carried out right after it receives new aircrafts,
slated for December 2011.

As such,
the total sum of money JPA will have to pay in 2011 alone would reach 45
million dollars.

As I can see, JPA now needs capital
very much to maintain business. How has the company’s board of management
persuaded its shareholders to arrange such a huge sum of capital in the current
difficulties?

Shareholders
have reaffirmed their determination to build up JPA into a leading budget
airline in Vietnam.

It is
expected that by 2015, JPA will have a fleet of 15 new A320s, and JPA will
receive four new aircraft each year in the period from 2012 to 2014. This will
allows JPA to implement the plan to expand the air route network with 12
domestic routes and four international routes to regional countries.

Shareholders have approved the plan to issue new shares to
existing shareholders and outside shareholders to raise the chartered capital.

The financial difficulties have led
to Jetstar Pacific owing nearly 200 billion dong worth of fuel to Vinapco,
which has threatened to collect air petrol money from JPA prior every flight
(3.6 billion dong a day), if JPA cannot get the guarantee from SCIC or a credit
institution prior to June 4? What will JPA do to settle the current problem?

As I said above, JPA is facing temporary difficulties due to
many objective problems which are also the problems of many other companies.
The JPA’s principle is that JPA must respect the provisions stipulated in the
fuel supply contract it signed with Vinapco. As for the sums of money JPA pays
late, JPA will pay interests in accordance with the laws.

JPA has sent a document to Vinapco, informing the debt
payment process which has got the agreement from Vinapco. JPA commits to settle
debts prior to July 31, and the normal payment will be resumed from August 1.

In the immediate time, JPA has accepted the request by
Vinapco to make payment one day in advance for the flights of the next days.

Ha Yen