Beruflich Dokumente
Kultur Dokumente
THE AUCTIONEER
HO CHI MINH STOCK EXCHANGE
Address:
Telephone:
(84.8) 38217713
THE ISSUER
VIETNAM AIRLINES COMPANY LIMITED
Address:
Telephone:
(84.4) 38272289
DOMESTIC ADVISOR
BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM
SECURITIES JOINT STOCK COMPANY
Headquarter:
10th Floor BIDV Tower, 35 Hng Voi Str., Hoan Kiem Dist, Ha Noi
Telephone:
(84.4) 39352722
Branch:
9th Floor, 146 Nguyen Cong Tru Str., 1 Dist., Ho Chi Minh City
Telephone:
(84.8) 39142956
THIS PROSPECTUS AND SUPPORTING DOCUMENTS ARE PROVIDED BY THE ISSUER, THE AUCTIONEER,
THE ADVISOR, AND AGENCIES LISTED IN THE AUCTION REGULATION
TABLE OF CONTENTS
Part I. Introduction . . . . . . . . . . . . . . . . . . . . . . . 4
Forward-Looking Statements . . . . . . . . . . . . . 11
Use Of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 85
Company Profile . . . . . . . . . . . . . . . . . . . . . . 12
Management . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Valuation Results . . . . . . . . . . . . . . . . . . . . . . 23
Principal Assets Of Our Business . . . . . . . . . 26
Appendix 2: Property As Of
March 31st 2013 . . . . . . . . . . . . . . . . . . . . . 107
PART I. INTRODUCTION
This is an innitial public offering of Vietnam Airlines common stock, a step
equitization process.
in our
Neither we, nor the advisors, have authorized any party to provide you with additional
information or information different from that contained in (i) this prospectus, (ii) the Bidding Form,
and the (iii) Auction Regulation. You should rely only on these documents to make purchase decision.
We take no responsibility for, and can provide no assurance as to the reliability of, any information
that others may give you. We are offering to sell shares of our common stock only in jurisdictions
where offers and sales are permitted. If you have any questions regarding this prospectus, you should
inquire independent advisors.
The information appearing herein is accurate only as of the date of this prospectus. Our
business, financial conditions, liquidity, and operating results may have changed since that date.
Vietnam Airlines Ltd. is a 100% state-owned company. We are currently in the equitization
process to raise capital through shares offering while retaining the States existing equity. The number
of shares issued in the upcoming offering will account for 25% of our share capital after equitization.
We will continue to assume the existing rights, obligations, and benefits in accordance with
applicable laws. Upon obtaining business license, Vietnam Airlines will have legal capacity as stated
in the law of Vietnam including official seal and corporate bank account, and will operate under the
States law and our Charter.
As a part of our equitization process to become a joint stock company, we are offering to sell
our Vietnam Airlinesshares. Investors will be Vietnam Airlines Joint Stock Companys shareholders
and assume all rights and obligations as stated in the States law and our Charter.
49,009,008 shares
Par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,000 VND
100 shares
49,009,008 shares
Type of auction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Registration locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposit requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auctioneer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional shares issued . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares offered to public . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares offered to foreign strategic investors . . . . . . . .
Shares offered to employees at a discount . . . . . . . . . .
Shares offered to Vietnam Airlines Union . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shares
Total value
(billion VND)
75.00
25.00
3.475
20.00
1.475
0.05
100
1,057,638,000
352,546,000
49,009,008
282,036,800
20,795,100
705,092
1,410,184,000
10,576.38
3,525.46
490.09
2,820.36
207,951
7.05
14,101.84
Circular No. 33/2012/TT-BLTBXH by the Ministry of Labor, Invalids and Social Affairs
on employee benefits stated in Decree 59/2011/N-CP dated 18/07/2011 by The
Government on 100% state-owned company equitization;
Decision No. 929/Q-TTg dated 17/07/2012 by the Prime Minister ratifying Restructuring
state-owned enterprises, focusing on large groups and corporations for the period 20112015 project;
Decision No. 172/Q-TTg dated 16/01/2013 by the Prime Minister ratifying Vietnam
Airlines equitization project for the 2012-2015 cycle;
Dispatch No. 1567/TTg-CN dated 18/10/2007 by the Government Office ratifying aircraft
purchases and fleet development plan until 2015 and 2020;
Dispatch No. 1567/TTg-KTN dated 22/09/2008 by the Prime Minister ratifying fleet
development plan of Vietnam Airlines and Vietnam Aircraft Leasing Company;
Resolution No. 83/NQ-CP dated 08/07/2013 by the Prime Minister on Monthly Government
Meeting in June/2013, which contains relevant information on aircraft purchase guarantee
mechanism for Vietnam Airlines;
Decision No. 1611/Q-TTg dated 10/09/2014 by the Prime Minister ratifying Vietnam
Airlines equitization plan;
Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Headquarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Headquarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tittle
Chairman of Vietnam Airlines
Director General of Department of Enterprise
Management - Ministry of Transport
Deputy Director General of Agency for Corporate
Finance - Ministry of Finance
Deputy Director General of Department of Finance Ministry of Transport
Deputy Director General of Department of Enterprise
Management - Ministry of Transport
Member of Vietnam Airlines Board of Management,
Chief Executive Officer of Vietnam Airlines
Member of Vietnam Airlines Board of Management
Member of Vietnam Airlines Board of Management
Member of Vietnam Airlines Board of Management
Director of Vietnam Airlines Human Resources Dept.,
Position
Head
Deputy Head
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Issuers representatives
Mr.Pham Viet Thanh . . . .
Mr. Pham Ngoc Minh . . .
The listed individuals are responsible for the accuracy, integrity, and legality of the information
and data in this prospectus for investors to make reasonable assumptions regarding our assets,
business activities, financial conditions, performance, and future results before purchasing our shares.
Domestic Advisors representatives
Mr. Do Huy Hoai . . . . . . . . . CEO of Bank for Investment and Developement of Vietnam Securities
JSC
The Domestic Advisor, Bank for Investment and Development of Vietnam Securities Joint Stock
Company (BSC), prepared this prospectus based on the information provided by Vietnam Airlines.
BSC has followed the guidelines required by applicable laws without providing any assurance to the
value of the securities.
Certain airline industry terms and other terms are used in this prospectus to describe our business
and financial performance.The following is a list of terms and abbreviations used herein:
ASK . . . . . . . . . . . . . . . . .
ATK . . . . . . . . . . . . . . . . .
BSP . . . . . . . . . . . . . . . . . .
CLMV . . . . . . . . . . . . . . .
Codeshare. . . . . . . . . . . . .
Equitization . . . . . . . . . . .
Charter capital . . . . . . . . .
A term Vietnam uses to describe the aggregate par value of the number
of issued shares. The number of issued shares is the number of shares
fully paid up to the company by shareholders.
GSA . . . . . . . . . . . . . . . . .
IATA . . . . . . . . . . . . . . . .
Interlining . . . . . . . . . . . . .
Decree 59 . . . . . . . . . . . . .
PSA. . . . . . . . . . . . . . . . . .
RPK . . . . . . . . . . . . . . . . .
RTK . . . . . . . . . . . . . . . . .
SPA. . . . . . . . . . . . . . . . . .
10
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on our current projections and
expectations about our future developments and financial performance, especially in the Post-IPO
Strategic Direction section. Forward-looking statements are not historical facts and subject to various
risks and uncertainties. Actual outcomes may materially differ from what indicated in these
statements.
Forward-looking statements reflect our current views with respect,but not limited to:
Our relationships and collaboration with foreign strategic investors and partners support in
our operations and organizational management;
Statements regarding our future financial perfomance, objectives, strategies, business model,
organizational structure, and operations after equitization are forward-looking. Those statements may
use words such as will, believe, predict, estimate, project, may, plan, expect,
intend, potential, should, and other words and terms of similar meaning in connection with a
discussion of future operating or financial performance. While we believe our expectations are
reasonable, such statements are not necessarily accurate indications of future results.
We undertake no obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or other circumstances, except as required by law. With
regard to this cautionary annoucement, investors should carefully evaluate all forward-looking
statements in this prospectus in the context of risks and uncertainties.
11
www.vietnamairlines.com
0100107518
Business registration No.0100107518 issued for the first time by Hanoi Department of Planning
and Investment on 30/6/2010 and amended for the 2nd time on 06/12/2013.
An overview of our business
According to the certificate of business registration No. 0100107518 issued by Hanoi
Department of Planning and Investment for registration of the 2nd amendment on 6th December
2013, Vietnam Airlines lines of business consist of:
Air transport of freight, including transport of luggage, cargo, parcels, parcels, letters;
Services of direct support to air transport, including: General air activities (flying for aerial
photography, geological surveys, calibration of aeronautical stations, repair and
maintenance of high power lines, serving the oil and gas industry, afforestation,
environmental monitoring, search of accidents, medical emergencies, political, economic,
social, defense and security missions); Other specialized air services; Supply of commercial
services, tourism, hotels, duty free sales at airports and provinces; other aviation services;
Supply of technical ground services; services at the passenger terminals, cargo terminals
and parking services at the airports;
12
Restaurant and catering services for mobile service, including: Production, processing,
import and export of in-flight meals;
Wholesale of solid, liquid, gas fuels and related products, including: Supply of air
petroleum and grease (including fuel, lubricants and specialized liquid) and other petroleum
at the airports and other locations; Export-import of aviation petroleum and grease
(including fuel, lubricants and specialized liquid) and other petroleum;
Agents, brokers of auctions, including: Agent of petroleum retail; Agents for airlines,
Manufacturers of aircraft, engines, equipment, aircraft spare parts, international and
domestic transport and tourism companies;
Other currency intermediation, including: Finance and Banking (the enterprise is only
allowed to operate upon approval from national competent authorities);
Financial leasing activities, including: Financial leasing (the enterprise is only allowed to
operate upon approval of the national competent authorities);
Undergraduate and postgraduate training (the enterprise is only allowed to operate upon
approval of the national competent authorities);
Labor supply (excluding brokerage, introduction, employment and labor supply for
enterprises specializing in labor export and supply, management of labor working abroad);
Export and import of labor (the enterprise is only allowed to operate upon approval from the
competent state competent);
Business of real estate, land use rights under owners, properties users or leaseholders;
Other operational support services, including: E-commerce services (For lines of business under
special provisions, the enterprise is only allowed to operate where meeting such provisions as
prescribed by law).
Our history
Our corporate history is deeply rooted in the the earliest days of the Vietnam civil aviation
industry, since January 1956 when Civil Aviation Administration was established by the Government
of Vietnam. From our humble beginning of a small fleet with 05 propeller aircraft of IL 14, AN 2,
Aero 45.., we inaugurated our first domestic service in September, 1956.
Originally, we were established as a State commercial entity serving large scale air transportation
(originally known as the National Air Carrier) in 1993. On May 27, 1995, we were established under
the Decision No. 328/TTg of the Prime Minister merging 20 aviation companies, in which we were
the holding entity.
13
For the past 20 years, we have been contributing significantly to the development of the civil
aviation industry, the national economy and Vietnam societal advancement in a time of
industrialization and reform.
The following table set out several of our development milestones since our inception in 1956:
1956 . . . . . . . . . . . . .
1993 . . . . . . . . . . . . .
1995 . . . . . . . . . . . . .
2002 . . . . . . . . . . . . .
2003 . . . . . . . . . . . . .
2006 . . . . . . . . . . . . .
2009 . . . . . . . . . . . . .
Setting up Cambodia Angkor Air a joint venture with the Royal Government of
Cambodia with a share capital of 100 million USD, in which VNA holds 49%
2010 . . . . . . . . . . . . .
2012 . . . . . . . . . . . . .
Received the transfer of the state capital (68.46%) in Jetstar Pacific Airlines
(JPA) from the Government of Vietnam, and thus becoming the majority
shareholder of the company.
1/2013 . . . . . . . . . . .
The Ministry of Transport approved March 31, 2013 as the valuation date of
Vietnam Airlines equitization.
5/2014 . . . . . . . . . . .
9/2014 . . . . . . . . . . .
First class Labor Medal, awarded by the President of Vietnam in 1996 & 1997;
Regular-scheduled flights for both passenger and cargo in the domestic and international
markets;
Operational support
Other
services:
commercial
advertising
on
our
publications;
aircraft/house/infrastructure/airport facilities leasing; cargo handling and forwarding
services; sale of duty free goods and other services.
18 subsidiaries, in which we hold more than 50%, and 8 associates in which we hold 20% to
less than 50%. These entities participate directly or indirectly in our aviation supply chain in
order to provide an integrated set of aviation solution, culminating in our products.
On the functional levels, we specialize ourselves into departments and divisions to handle our
day-to-day business as well as administration function. The chart in the following page set out our
management structure for the fiscal year 2013:
15
MINISTRY OF
TRANSPORTATION
SUPERVISORY BOARD
BOARD OF MANAGEMENT
GENERAL SECRETARIAT
Training Dept
Legal Dept
IT Dept
Corporate Affairs
Investment dept
Operation Control
Center
COMMERCE DIVISION
Northern Regional
Branch
Center
TanSonNhat Operation
Oversea Branches
(32)
company (VASCO)
Vietnam Aviation
Dept
Institute
services
Middle Regional
Branch
Southern Regional
Branch
TECHNICAL DIVISION
Heritage magazine
services
TanSonNhat ground
handling services
16
Subsidiaries &
Associates
MANAGEMENT
Coporate governance structure
Our corporate and management structure consist of:
The Board of Management: is the authorized representative of the Government in Vietnam
Airlines, responsible for the rights and obligations of the State in our business. The term of Members
shall not exceed 05 years. The Members can be reappointed.
The President &CEO: The President&CEO is the legal representative of our company and is in
charge of our daily operations in accordance with the objectives, plans, resolutions and decisions of
the Board of Management and with the corporate charter, prevailing laws and regulations. They are
legally accountable for the performance of their assigned tasks.
Vice Presidents and Chief Accountant: shall be appointed, dismissed, removed (including
compensations and other benefits removal) by the Board of Management at the proposals of the
President &CEO. The Vice Presidents take part in, and are legally accountable the daily operations as
assigned and authorized by the President &CEO, and report directly to the President &CEO. The
Chief Accountant reports directly to the CEO and is responsible for: (i) Setting up the accounting
system, establishing the appropriate protocols and suitable accounting teams; (ii) Making proposal
relating to financial & capital management to ensure the capital needs for business operation; (iii)
Assisting the CEO in financial supervision and managing the financial resources at Vietnam Airlines
in accordance with finance & accounting standards and current regulations; (iv) Other rights and
obligations as prescribed by law.
Corporate Departments: Consists of advisory and functional departments with the function of
advising and assisting the Board of Management, President&CEO in management and administration.
List of Members in the Board of Management and Board of Directors
The Board of Management:
17
18
Subsidiary name
Head Office
Currency
Million
VND
Million
VND
Aviation Construction
JSC(AVICON)
Noi Bai Catering Services
Registered
share capital
Contributed
share capital
400,000
400,000
Registered
capital of
Contributed
Vietnam
capital of
Airlines Vietnam Airlines
400,000
400,000
Vietnam
Airlines Main lines of
ownership business
100%
Aviation fuel
trading
Aicraft repair
100% and
maintenance
Automated
90% reservation
service
1,059,097
1,059,097
1,059,097
1,059,097
180,000
180,000
180,000
180,000
USD
100,000,000 75,000,000
59,000,000
59,000,000
78.67%
Air
transportation
Million
VND
1,867,438.4 1,867,438.4
1,266,697.8
1,266,697.8
67.83%
Air
transportation
USD
Million
VND
8,578.1
8,578.1
5,579.9
5,579.9
26,527.7
26,527.7
17,119.7
17,119.7
50,000
50,000
30,000
30,000
Forwarding,
ground
65.05% hanlding and
warehousing
services
64.54%
Civil
construction
60% In-flight
Due to commitments upon establishment of Cambodia Angkor Air Joint Venture (K6), the second round of investment period started from 2011, at which point we would
contribute a further 49 million USD (not including an investment trust of 10 milions USD), equivalent to capital stake of 49% registered share capital. However, due to the
non-fulfilment of remaining shareholders, our investment at K6 for the fiscal year ended December 31, 2013 is 78,67%. During the 3rd Quarter of 2014, the remaining
sharehoders had completed their obligations and VNAs stake at K6 was 49%.
19
Subsidiary name
Head Office
Currency
JSC (NCS)
VND
USD
Registered
share capital
Contributed
share capital
Registered
capital of
Contributed
Vietnam
capital of
Airlines Vietnam Airlines
Vietnam
Airlines Main lines of
ownership business
catering
100%
In-flight
catering
84,603.3
84,603.3
84,603.3
45,004.4
Million
VND
95,850
95,850
52,840,3
52,840,3
Million
VND
93,726
93,726
51,549
51,549
General
52.99% aviation
services
Million
VND
28,000
28,000
14,838.2
14,838.2
Million
VND
55,800
58,031.7
30,600
30,600
52.73% IT services
Million
VND
100,000
66,000
34,000
34,000
Million
VND
51,430
51,430
26,230
26,230
51%
Cargo,
forwarding
VACS was converted from a joint venture company. The difference between the registered share capital and share capital of the VNA by (i) the difference between exchange
rate at the time of conversion and (ii) the purchase price when VNA bought the joint venture is lower than par value.
3
AITS hasnt changed the business registration certificate in accordance with its contribution capital
20
Subsidiary name
Head Office
Currency
Registered
share capital
Contributed
share capital
Registered
capital of
Contributed
Vietnam
capital of
Airlines Vietnam Airlines
Vietnam
Airlines Main lines of
ownership business
services
Million
VND
83,157,6
83,157,6
42,411,6
42,411,6
Million
VND
10.000
10.000
5.100
5.100
Million
VND
21.419,2
21.419,2
10.924,2
10.924,2
21
Air
transportation
51%
support
services
Aviation Labor
import-export
51%
and tourism
service
Printing and
51% packaging
services
WORKFORCE
Workforce structure
As at the date of public disclosure of the company valuation result (14/05/2014), our total
number of regular staffs and employees are 10,180. The number of our employee staying with us after
equitization will be 10,180.
The following tables sets forth information regarding our workforce composition on May 14,
2014.
By gender
Male . . . . . . . . . . . . . . . . .
Female . . . . . . . . . . . . . . .
5,528
4,652
By education
PhD . . . . . . . . . . . . . . . . . .
Masters . . . . . . . . . . . . . . .
Undergraduate . . . . . . . . .
College . . . . . . . . . . . . . . .
Polytechnique . . . . . . . . .
Vocational workers . . . . .
Technicians . . . . . . . . . . .
Untrained . . . . . . . . . . . . .
23
473
4,252
857
913
2,850
433
379
By age
Under 30 . . . . . . . . . . . . .
From 31 to 40 . . . . . . . . .
From 41 to 50 . . . . . . . . .
From 51 to 55 . . . . . . . . .
From 56 to 60 . . . . . . . . .
3,541
3,956
1,792
630
261
By department
Advisory & Strategy . . . .
Flight operation . . . . . . . .
Sales and Marketing . . . .
Services . . . . . . . . . . . . . .
Technical . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . .
602
3,201
1,780
4,128
128
341
Workforce evaluation
Our workforce has grown significantly in terms of quantity and quality in order to meet business
requirements. Besides the fleet and equiment renovation program, we have been placing special focus
on recruitment and training, particularly for those require dinstictive skill set in our operation such as
pilot, flight attendant, engineer and aircraft technician.We plan to gradually reduce the number of
foreign professionals requiring high compensation and benefits package.
Our workforce is young on average. 75.9% of our team are under 45 years old, of which
employees under 30 years old account for nearly 40%. The proportion of graduate and postgraduate
employees accounts for 45.8%. Specialized aviation staff (pilot, technical staff, and cabin attendant)
accounting for the majority (60%) of our workforce.
With the goal of becoming a four-star airline by 2015 2016 and one of the premium air
transportation service providers in South East Asia by 2020, we aim to provide a comprehensive
training to our managers for them to excel and improve the working environment of our staff through
our standardizing of job titles and further extending employees skill set through workshops and
seminars. By applying the lastest practices in human resources management, we are now making
transformative progress in increasing employees engagement, especially among our managers, flight
operators and technicians. Diversifying our recruitment channels has now resulted in a team of pilots
with 600 Vietnamese, meeting more than 69.8% of our operating requirement.
Our productivity as measured by ASK per employee increased by 10% on yearly basis. Compared to
other carriers in SkyTeam and Oneworld alliances, this is an above-average level of productivity,
comparable to China Southern Airlines, Korean Air, and American Airlines.
22
VALUATION RESULTS
Enterprise valuation results as at 31/3/2013
Pursuant to Decision No. 1807/Q-BGTVT issued by Ministry of Transport dated 14th May
2014 on the results of Vietnam Airlines enterprise valuation for equitization:
Using the book-value method as at 31st March, 2013 (after accounting adjustment based on
recommendation from the State Audit of Vietnam):
As of 31st March, 2013, we are valued at 57,156,505,406,732 VND (Fifty seven thousands one
hundred and fifty six billion, five hundred and five million, four hundred and six thousands, seven
hundred and thirty two VND), equivalent to 2,744 million USD (Two thousands, seven hundred and
forty four million US dollars).
The contribution capital from the State in the enterprise: 10,576,378,635,374 VND (Ten
thousand and five hundred and seventy six billion, three hundred and seventy eight million, six
hundred and thirty five thousands, three hundred and seventy four VND), equivalent to 507.79
million USD (Five hundred and seven point seven nine million US dollars).
Using the valuation result done by Morgan Stanley & Co. International PLC and Citigroup
Global Markets Asia Limited:
As of 31st December, 2013, for the purpose of equitization we are valued at 57,047,892,000,000
VND (Fifty seven thousand and forty seven billion, eight hundred and ninty two million dong),
equivalent to 2,739 million USD (Two thousands, seven hundred and thirty nine million US dollars).
The contribution capital from the State in the enterprise: 23,493,984,000,000 VND (Twenty three
thousand four hundread and ninety three billion, nine hundred and eighty four million dong),
equivalent to 1,128 million USD (One thousand, one hundred and twenty eight million US dollars).
Additionally, Decision No. 1807/Q-BGTVT dated 14th May 2014 specified that the Parent
Company Vietnam Airlines will not adjust VNAs accounting books according to the results of
enterprise valuation.
Assets not accounted for in the valuation
Amount of assets not accounted in the equitization book value at 31st March, 2013 was
44,594,399,211 VND (in which Parent Company Vietnam Airlines was 38,040,106,205 VND;
VAECO was 101,159,281,058 VND and VINAPCO was 5,395,011,948 VND), including:
Vietnam Airlines is responsible for handing over the unused assets and to be liquidated assets to
the DATC (Debt &Asset Trading Corporation) while ensuring no loss of States properties occurs
during the transfer.
Resolved issues following the recomendation of the State Audit of Vietnam
Following the recommendation of the State Audit in the Assessment Report on the Valuation
results, we have completed the followings:
23
Completing the relevant steps to obtain the confirmation regarding the land use plan outside
the airports of VINAPCO: Vietnam Airlines and VINAPCO have sent the Land Use Plan to
the local Peoples Committees of Hanoi, Ho Chi Minh, Da Nang and Khanh Hoa, of which
all have sent the confirmation on the current situation and the Land Use Plan.
Issues to be resolved
We will continue to resolve necessary legal requirements regarding property rights in accordance
with the current regulations regarding our equitization process. Up to now, we have strictly
followed the recommendations of the State Audit of Vietnam on issues related to land use rights. We
have essentially resolved the legal procedures on the following cases:
Regarding the 03 expired land use rights. These would continue to be leased to our company as
specified in Decisions No. 4655/QD-UBND, 4659/QD-UBND and 4658 /QD-UBND dated
September 9, 2014 issued by the Hanoi Peoples Committee.
Regarding the land use rights without official certificates. The certificates have officially been
issued by the Gia Lai Peoples Committee to Vietnam Airlines. Regarding the 04 plots in the airports
without land use right contracts: We have sent the required document to the Civil Aviation
Administration to initiate the signing of the land lease contracts. The Administration has aggreed with
the plan and allowed us to complete the necessary procedures.
Regarding the 09 plots outside the airports without legal documents. The Hanoi Peoples
Committee issued Decisions No. 4654-4661/QD-PPC on September 9th 2014 permitting us to lease
08 plots of land (the remaining plot of 1.78 ha would be returned to Hanoi Peoples Committee).
We are to verify and certify receivable and payable accounts which are not yet verified till the
date of official conversion to a joint stock company (not including receivable and payable accounts
which must be verified according to the technical specification in the application of Dispatch
No.2903/VPCP-DMNN dated April 12, 2013). Currently, we have completed the verification except
for the bad debts under the accounts of Indochina Airlnes, Aviation Hotel JSC and Aviation High
grade Plastic JSC.
We are to direct VINAPCO to continue to settle the damage caused after the incident at Lien
Chieu warehouse (Da Nang), and resolve the financial issues related to the case. The ruling of the first
trial on Febuary 27, 2014 by the Peoples Court of Hanoi was that PJICO was to pay a compensation
of 68,425,766,400 VND to VINAPCO. However, PJICO did not agree with this ruling and decided to
appeal. There has not been a final decision from the appellate court.
We are to direct VINAPCO to transfer the ground gasoline distribution system to Petro Vietnam
Oil (PVOil) according to the guidelines from the Ministry of Finance, and report to the relevant
authority in the case that our company value is affected by the transfer. On June 26, 2014, VINAPCO
has completed transferring the assets to PVOil on 12am, July 1, 2014 .
The following tables set forth the details regarding the transferred assets: Book value of
the transferred assets on VINAPCOs financial statements.
Fixed assets
In VND, as at 30/06/2014
Assets
Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipments and machineries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transport vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office equipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tanks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible fixed assets (land use right). . . . . . . . . . . . . . . . . . . . . . . .
24
Historical cost
24,009,237,337
12,723,598,183
9,717,101,632
1,097,130,357
203,256,718
268,150,447
3,544,889,629
6,478,155,201
1,987,084,738
4,255,177,144
7,289,831
228,603,488
1,949,956,558
Current assets
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading tools & Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Historical cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bad debts provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fuel Price Stability Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In VND, as at 30/06/2014
11,836,683,701 VND
2,424,244,433 VND
123,139,984 VND
33,504,784,497 VND
27,705,608,441 VND
995,495,390 VND
(19,841,128,453) VND
(14,307,871,124) VND
Source: VINAPCO
Workforce
The number of employees transferred to PVOil is 155 employees, including 31 transferred to
Middle Region Petro Unit and 124 transferred to Northern Region Petro Unit.
Land
The following table sets forth the details regarding the lands transferred to PVOil from
VINAPCO
Area
(m2)
Viet Tri Petrol warehouse Ben Got ward, Viet Tri city, Phu Tho. . . . . . . . . . . . . . . . . . . . . 11,426.5
Head office of Northern Aviation Trading Services Unit, - Mai Lam commune, Dong
1,080
Anh, Hanoi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
464
Ho Sen Petrol station Nguyen Son, Long Bien, Hanoi . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mai Lam Petrol station Mai Lam commune, Dong Anh, Hanoi . . . . . . . . . . . . . . . . . . . . . 2,939.5
1,482
Phu Lo Petrol Station Phu Lo commune, Soc Son, Hanoi . . . . . . . . . . . . . . . . . . . . . . . . . .
Hai An Petrol station An Hung commune, An Hai, Hai Phong . . . . . . . . . . . . . . . . . . . . . . 7,267.7
2,910
Viet Tri Petrol Station Thanh Mieu ward, Viet Tri city, Phu Tho . . . . . . . . . . . . . . . . . . . .
750
Tan Thinh Petrol station Tan Thinh ward, Thai Nguyen city . . . . . . . . . . . . . . . . . . . . . . . .
2,480
Vinh Yen Petrol station Khai Quang commune, Vinh Yen, Vinh Phuc . . . . . . . . . . . . . . . .
3,030
My Thuan Petrol station My Thuan commune, My Loc district, Nam Dinh . . . . . . . . . . . .
1,944
Ninh Binh Petrol station Nam Thanh ward, Ninh Binh city . . . . . . . . . . . . . . . . . . . . . . . . .
3,025
Quang Nam Petrol station Tam Dan, Tam Ky city, Quang Nam. . . . . . . . . . . . . . . . . . . . . .
1,904
Dien Ngoc Petrol Station Dien Ngoc Industrial Park, Quang Nam . . . . . . . . . . . . . . . . . . .
750
Phu Yen Petrol Station Tuy Hoa town, Phu Yen province . . . . . . . . . . . . . . . . . . . . . . . . . .
688.7
Da Nang Petrol Station 154 Cach Mang Thang 8 street, Khue Trung, Cam Le, Da Nang .
25
Domestic and CLMV network (Cambodia, Laos, Myanmar) is crucial to our competitive
advantage and will be extensively developed;
Northeast Asia route is our core network due to its significant contribution to our
profitability;
Transcontinental routes remain within our long-term strategy, which will be carefully
researched and developed.
To meet the growing demand of national economic development, our domestic route network has
been rapidly developed and organized based on the model of hub and spoke, covering the whole
regions, coinciding with Vietnams transportation planning and tourism development. We added 11
routes and increased frequency in our domestic network during 2008 2013. The trunk routes are
operated with a high frequency throughout the day. The tourism routes connect popular attractions
such as Da Nang, Hue, Nha Trang, Phu Quoc, Da Lat and Con Dao have been enhanced in capacity,
satisfying the rising demand of traveling during the holiday season. Addtionally, the local routes
connecting Haiphong, Vinh, Quang Binh, Quy Nhon, Can Tho, Tay Nguyen with other economic
centre in Vietnam will continue to be maintained and structured to suit the demand to promote trade
and tourism.
Our international network has been expanding rapidly to meet the demand of development and
economic - political - social exchange between countries, enhancing our regional competitiveness
and maintaining our market position as the flag carrier of Vietnam. Regarding European network, we
mainly have been servicing destinations including Paris, Frankfurt, Moscow, and London. Regarding
Northeast Asia network, we have been constantly improving our offerings, increasing the frequency
from Hanoi/Saigon/Danang to the main cities of Japan, South Korea, China, Taiwan ... to meet the
growing demand from these potential markets. Regarding network in Southeast Asia, we have
continuously been expanding in order to assert our position as the leading carrier in the region and
making Vietnam as a gateway hub in Southeast Asia, connecting to other international financial and
social centers. Specifically, from 36 international routes and 27 domestic routes in 2008, by the end of
2013, we have extended our network to 52 international routes to 29 destinations in 17 countries, 39
domestic routes to 21 domestic destinations.
The following table sets out information regarding our route expansion for the period 2008
2013.
For the year ended December 31,
2008
2009
2010
2011
2012
2013
27
19
31
20
35
20
37
20
38
20
39
21
36
24
14
36
24
14
43
26
15
46
27
16
47
28
17
52
29
17
Domestic
Number of Route . . . . . . . . . . . . . . . . . .
Number of Destination . . . . . . . . . . . . .
International
Number of Route . . . . . . . . . . . . . . . . . .
Number of Destinations . . . . . . . . . . . . .
Number of Countries . . . . . . . . . . . . . . .
The following table shows information regarding our international route network as of June 30,
2014
Route
26
Destinations
Route
81
73
2
17
4
8
128
32
47
49
Southeast Asia
99-102
Australia
14
10
57
29-30
10
8
7-8
4
CLMV Sub-region
Northeast Asia
China
Europe
TOTAL
53
Destinations
5 Destinations
Vientiane, Luang Prabang (Laos)
Phnom Penh, Siem Reap (Cambodia)
Rangoon (Myanmar)
8 Destinations
Cao Hung, Taipei (Taiwan)
Tokyo, Osaka, Fukuoka, Nagoya
(Japan)
Seoul, Pusan (Korea)
4 destinations: Thailand, Singapore,
Malaysia, Indonesia
2 destinations: Sydney, Melbourne
6 destinations: Hong Kong, Shanghai,
Beijing, Guangzhou, Chengdu, Hangzhou
(China)
4 Destinations:
Paris (France)
Frankfurt (Germany)
Moscow (Russia)
London (United Kingdom)
29
Besides the current operating routes, we have continuously expanded the scope of business in
various forms of cooperation through interlines, Special Prorate Agreement (SPA), and codeshare
partnerships. By doing so, we have been able to expand our network, thereby expanding our
destinations and developing our sales channel, diversifing our products, improving our international
brand awareness. By the end of 2013, we have codeshare partnership with 20 airlines and and the
French National Railway Company; SPA with 80 airlines and Deutsche Bahn a German railway
company. Through codeshare partnership, our total number of destinations increases by 66 cities,
including 9 Asian cities, 6 Middle East cities, 19 American cities, 31 European cities and 1 African
city.
Sales & distribution network
Air transport is our main business and therefore constitutes our main revenue source. Air
transport operation consists of passenger and cargo operations, air charter services, and other technical
and economic services (aerial photography, geological surveys, etc) performed by Vietnam Air
Services Company (VASCO) - a dependent unit of Vietnam Airlines. In the period of 2008-2013,
transportation revenue accounted for 96,9% of total revenues.
We have focused on our distribution system and sales network development to boost revenues
and to penetrate new market segment. Our sales channels consist of: (i) direct sales at Vietnam
Airlines offices and international branches; (ii) indirect sales through Passenger Sales Agents and
General Sales Agents (PSA and GSA) designated by Vietnam Airlines, or via the BSP agents and tour
operators.
Our international sales channels cover extensively Asia, Europe, Australia and North America.
At December 31, 2013, we had 32 representative offices in 20 countries and regions, 14 GSAs, joined
BSP/ARC systems of 38 countries for ticket sales and distribution..
In the domestic sales network, we had 03 regional offices in the North, Middle and South located
in Ha Noi, Da Nang and Ho Chi Minh City. The regional offices are responsible for ticket sales,
distribution and promotion to approximately 200 domestic agents.
27
In line with the rapid development of e-commerce, we had invested in our online ticketing
system to directly reach out to customers and reduce our selling expenses. Currently, revenue from
online sales accounted for approximately 6.3% of our total revenue. E-tickets have been deployed
since 2008 across our distribution network. We have signed contracts of selling e-tickets with 90
airlines, including SPA cooperation with 80 airlines.
Our substantial sales agent network is our most important distribution channel, which contributes
approximately 90% our ticket revenue. Through those agents, we can access an international
customerbase.
Fixed assets
We are a leading air service provider in Vietnam with large base of worldwide offices,
subsidiaries and dependent units. We operate a considerable and diverse fixed assets base, and
because of our business nature, assets such as aircraft, land use rights, management system,
warehouses, electronic equipments, ground transportation vehicles play a crucial role in sustainability
and development of our company. At the time of March 31, 2013, our total assets value according to
net book value was 57,194 billion VND, in which our fleets constitutes 32,693 billion VND,
accounting for 57% of total assets.
The following tables set out our long-term asset value as of the date of valuation and by the end
of fiscal year 2013.
Assets
Historical cost
Residual value
9,749,504
7,832,195
271,752
484,928
742,653
417,976
38,798,707
371,683
58,818
312,865
48,919,894
3,803,732
2,717,860
98,936
215,419
510,644
260,873
11,222,085
140,561
309
140,252
15,166,378
5,945,772
5,114,335
172,816
269,509
232,009
157,103
27,576,622
231,122
58,509
172,613
33,753,516
Assets
Historical cost
In million VND
Depreciation &
Amortization
Residual value
11,160,908
9,343,240
285,009
430,923
855,143
246,593
41,513,874
391,017
57,054
333,963
4,286,970
3,207,173
109,132
202,268
609,808
158,589
13,278,243
187,301
187,301
6,873,938
6,136,067
175,877
228,655
245,335
88,004
28,235,631
203,716
57,054
146,662
28
Assets
Total . . . . . . . . . . . . . . . .
Historical cost
In million VND
Depreciation &
Amortization
Residual value
53,065,799
17,752,514
35,313,285
Boeing 777 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus A330. . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus A321. . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus 3202 . . . . . . . . . . . . . . . . . . . . . . . . . .
ATR 72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fokker F703 . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating
lease
6
9
16
3
5
28
9
2
43
Average fleet
age in year
Total
10
9
441
3
14
2
82
39
8.91
7.68
2.8
5.42
5.42
4.62
We had 83 aircrafts with an average age of 5.34 for the year ended December 31. 2013. The
following table sets forth our details regarding our fleet structure, fleet financing and fleet age at the
time:
Ownership
and finance
lease
Boeing 777 . . . . . . . . . . . . . . . . . . . . . . .
Airbus A330. . . . . . . . . . . . . . . . . . . . . .
Airbus A321. . . . . . . . . . . . . . . . . . . . . .
Airbus 3202 . . . . . . . . . . . . . . . . . . . . . .
ATR 72 . . . . . . . . . . . . . . . . . . . . . . . . . .
Fokker F70 . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating
lease
4
31
9
2
46
Total
Average fleet
age (year)
6
9
17
10
9
48
9.67
8.43
3.28
14
2
83
6.17
37
5.34
The following table sets out our historical fleet development by aircraft types and method of
funding from 2009 to 2013.
For the year ended December 31,
Financing
280-300 seats
B777. . . .
B777. . . .
A330 . . .
150-180 seats
A321 . . .
A321 . . .
A321 . . .
2009
2010
2011
2012
2013
17
4
6
7
27
2
12
3
20
4
6
10
32
2
13
7
21
4
6
11
39
1
21
7
19
4
6
9
45
1
26
13
19
4
6
9
48
3
28
17
Finance lease
Operating lease
Operating lease
Purchase
Finance lease
Operating lease
29
A320 . . .
70 seats
AT7 . . . .
AT7 . . . .
AT7 . . . .
F70 . . . . .
Total
Operating lease
10
13
4
5
2
2
57
Purchase
Finance lease
Operating lease
Purchase
10
16
3
6
5
2
68
10
16
3
6
5
2
76
5
16
3
6
5
2
80
16
3
6
5
2
83
Other vehicles: In addition to aircraft and aircraft engines, other vehicles include cars,
trucks, dolly, high loader, push-back vehicles, and lavatory trucks for the purpose of ground
handling services for passenger and cargo.
Land
We were using 991.446,3 m2 and 946,195.3 m2 of land at the date of company valuation (March
31, 2013) and at December 31, 2013 respectively with the following structure:
31/03/2013
Area (m2)
(%)
246.118,00
24.8
15.447,30
1.6
31/12/2013
Area (m2)
(%)
224.500,50
23.4
14.758,60
1.5
209.741,90
21.1
209.741,90
21.9
766.277,10
991.466,30
77.3
100
733.043,80
957.544,30
76.6
100
Land by the State with the collection of long-term usage fees: 07 plots (8,456 m2) outside
domestic airports.
Leased land with annual rental payment: 30 plots with total areas of 293,446.3m2, of which
75,336.3m2 (5 plots) are inside domestic airports and 218,110 m2 (25 plots) are outside
domestic airports.
As at December 31, 2013, we had returned 02 plots outside the airport to Ho Chi Minh city (total
area of 2,822.2 m2) in accordance with the approved Land Usage Plan. We have been using the
allocated land according to the official planning in which Vietnam Airlines land use rights mostly are
long-term leases with annual rental payment. The remaining land use rights are purchased or
transferred from the Government to the company
Land use classification of VINAPCO
On March 31, 2013, VINAPCO has 36 land plots of 293,990.45 m2, in which:
Lands which will not be in use after the equitization:
30
Lands allocated for the Noi Bai International Airport Project and lands used for
VINAPCOs commercial fuel business operation: 16 plots were transferred to PVOil with
the total area of 42,561.7 m2 under the contract signed on June 16, 2014.
VINAPCO continues using 20 plots with the total area of 251,428.75 m2, classified as follows:
-
Leased land with annual payment: 17 plots with the total area of 245,126.15m2, in
which:
Land allocated by the State without any fee: 02 plots with the total area of 209,741.9 m2
Leased land with annual payment: 03 plots with the total area of 185,831.6 m2
Detailed information about the land managed by Vietnam Airlines is provided in Appendix 02.
31
Adjusted domestic sale price ceiling by the Ministry of Finance (an increase of 20% from
April, 2011)
We seized the opportunity of the economic recovery to inaugurate 07 new international and
03 new domestic routes in 2010.
In 2013, revenue growth was 6%, lower than the average in the previous year. Weaker JPY,
AUD, KRW currencies that we have major exposure to and intense competition on European
routes by South East Asia and European airlines affected our average yield on international routes.
Despite this slow down, revenue in 2013 is still twice the size of what it was back in 2008 2009
during the economic downturn.
2008
Total revenues . . . .
Air transportation
Passenger . . .
Cargo . . . . . . .
Air charter . . .
Others . . . . . .
Ancillary revenues
Technical &
Commercial
support . . . . . .
Commission .
2012
2013
52,828,835
51,366,955
45,407,388
4,376,687
924,309
658,571
1,461,880
568,859
61,436
2009
In million VND
Year ended December 31,
2010
2011
538,512
44,926
599,022
55,019
32
687,008
47,205
720,212
50,136
775,221
39,928
Unused ticket
&Asset leasing
Others . . . . . . . . .
Deductible revenue
Net revenue
434,344
350,024
419,535
484,989
168,249
232,435
347,006
587,431
421,643
184,429
-84,708
-141,814
-262,584
-347,161
-434,895
25,192,300 23,060,904 35,341,870 44,527,684 49,142,124
441,965
204,766
-368,775
52,460,060
Source: Vietnam Airlines Audited Financial Statement, 2008 2013. Passenger and Cargo revenue
has already included refund, and fuel surcharge.
Air Transportation
Passenger operations. With respect to our passenger traffic, we flew a total of 72,8 million
passengers in total during 2008 2013, 63% of which was domestic and 37% international. Passenger
traffic growth was 10.9%/year, with a domestic growth rate of 10.8%/year and 11.2%/year for
international. We flew 15 million passengers in 2013, or 1.7 times that of 2008.
Our operating capacity, as measured by ASK, grew by 10.3%/year on average in the same
period, of which domestic growth was 10.7% and international growth was 10.2%. Our capacity was
31,648 million seat kilometers, of which domestic was 8,604 million seat kilometer and international
was 23.044 million seat kilometer during the year ended December 31, 2013.
Total, domestic and international RPK increased by 11.1%, 10.2% and 11.5%, respectively. 2013
RPK was 25.098 passenger.kilometer, an increase of 70% compared to 2008.
Load factor in 2008 2013 was 81% for domestic routes, 74% for international routes, and 76%
in total. Most notably, 2013 international load factor was 78.7%, the highest figure we have obtained
so far.
In 2013, total passenger volume of Vietnam was 28.95 million of which Vietnam Airlines flew
15 million or 51.8% of the market, 9 million of which was domestic and 6 million was international.
The following table sets forth our ASK, RPK, load factor, passenger volume and market share
for our domestic and international passenger operations for the periods indicated:
2008
RPK
ASK
Load factor
Passenger volume
(million)
Market share
Domestic . . . . .
International. . .
Total. . . . . .
Domestic . . . . .
International. . .
Total. . . . . .
Domestic . . . . .
International. . .
Total. . . . . .
Domestic . . . . .
International. . .
Total. . . . . .
Domestic . . . . .
International. . .
Total. . . . . .
4,283
10,520
14,803
5,181
14,202
19,383
82.7%
74.1%
76.4%
5.4
3.5
8.9
78.7%
38.1%
55.6%
4,984
9,671
14,655
6,165
13,881
20,046
80.8%
69.7%
73.1%
6.3
3.1
9.4
74.1%
35.0%
54.0%
6,428
12,742
19,169
7,974
17,053
25,026
80.6%
74.7%
76.6%
8.1
4.2
12.3
79.1%
39.1%
58.5%
6,906
14,185
21,091
8,542
20,014
28,556
80.8%
70.9%
73.9%
8.9
4.8
13.6
75.5%
40.1%
57.7%
2012
2013
6,423
16,269
22,692
8,154
21,586
29,740
78.8%
75,4%
76.3%
8.3
5.3
13.6
70.6%
39.9%
54.4%
6,969
18,129
25,098
8,604
23,044
31,648
81.0%
78.7%
79.3%
9.0
6.0
15.0
63.2%
40.6%
51.8%
Cargo operation. Total Revenue Tonne Kilomters during 2008-2013 was over 998 thousand
tons, of which 600 thousand was domestic and 400 thousand was international. Total amount of cargo
transported in 2013 was approximately 184 thousand tons, 144% that of 2008. Cargo transport
growth, as measured by RTK, during 2008 2013 was 7.6%/year, of which domestic was 4.8% and
international was 11.2%.
33
Available Tonne Kilometers growth during 2008 2013 was 12%/year, 5.6% for domestic and
14% international. Total RTK reached 522,074 thousand tonne kilometers, and load factor increased
by 4% to 65.5% in 2012.
We have an overwhelming comptetitive advantage in the domestic cargo transportation market,
with a 5 year average market share of 90%. As for the international market, we hold a market share of
17% in 2013.
RTK
ATK
Load
factor
Cargo
Volume
(Tonne)
Market
share
Domestic . . . . .
International . . .
Total . . . . . .
Domestic . . . . .
International . . .
Total . . . . . .
Domestic . . . . .
International . . .
Total . . . . . .
Domestic . . . . .
International . . .
Total . . . . . .
Domestic . . . . .
International . . .
Total . . . . . .
2008
2009
76,704
219,283
295,987
154,768
393,041
547,809
49.56%
55.79%
54.03%
77,403
51,008
128,411
88%
20%
37%
85,462
207,509
292,971
190,858
370,621
561,479
44.78%
55.99%
52.18%
87,310
44,615
131,925
84%
18%
38%
109,899
305,719
415,618
255,829
473,933
729,762
42.96%
64.51%
56.95%
112,707
68,537
181,244
91%
21%
40%
112,806
299,219
412,025
260,519
586,162
846,681
43.30%
51.05%
48.66%
119,072
71,813
190,885
92%
21%
40%
2012
2013
115,715
363,908
479,623
204,123
605,260
809,383
56.69%
60.12%
59.26%
102,260
79,983
182,243
91%
19%
34%
100,784
421,290
522,074
177,499
619,575
797,074
56.78%
68.00%
65.50%
97,726
86,880
184,606
75%
17%
29%
Air charter4. In addition to our transport operation, we also promote our charter flight service line
in recent years. There was 3,513 charter flights during 2008 2013, of which 89 were domestic and
3,424 were international. Charter flight operation generates 87.8 million USD in total from 2008 to
2013, most of which was from international flight (98%).
Ancilliary revenues. Our ancilliary revenues of incidental revenues in ticket refund and
cancellation, , revenues from support activities from our three ground handling services enerprises and
other activities. While being only a minor part of our revenue base, this is an important business
activity in our integrated supply chain. Ancilliary revenues grew by 20.1%/year during the last 5
years. In 2013, ancillary revenues was 1,461 billion VND, up 12.7% compared to 2008.
Cost structure
Our Total cost/Total revenue ratio is 99.5% on average during 2008 2013. Total operating cost
in the same period is 40,210 billion VND/year, with an average growth rate of 16.6%/year, lower than
that of net revenue (19.7%/year). Major changes in Vietnam Airlines cost structure are as follows:
Overall, there was a shift from raw material, financial and compensation expenses to depreciation
and outsourced expenses. Other expenses is relatively stable in our cost structure. The reason for this
change in our cost structure is due to a re-classification of in-flight meals from raw material to
outsourced expenses. The following table sets forth our cost structure for the fiscal period from 2008 2013:
We supply our charter flight services to the Government of Vietnam, corporate and individual
34
2008
2009
2010
2011
(In Million VND)
%
Cost
Cost
Cost
Cost
42.7%
8,336,485
34.0%
13,492,375
36.3%
8.0%
2,027,989
8.3%
2,719,841
5.5%
1,560,442
6.4%
32.8%
10,370,347
0.8%
2012
2013
Cost
Cost
17,716,036
37.1%
19,597,055
38.4%
20,351,127
37.8%
7.3%
3,842,864
8.1%
3,891,898
7.6%
3,848,668
7.1%
1,791,117
4.8%
2,170,835
4.6%
2,796,099
5.5%
3,419,139
6.3%
42.2%
16,177,006
43.5%
20,572,521
43.1%
21,559,145
42.3%
23,108,030
42.9%
305,837
1.2%
406,181
1.1%
726,170
1.5%
1,022,966
2.0%
567,115
1.1%
10.1%
1,923,164
7.8%
2,553,563
6.9%
2,642,848
5.5%
2,069,046
4.1%
2,527,711
4.7%
0.1%
100%
29,662
24,553,926
0.1%
100%
32,185
37,172,268
0.1%
100%
37,652
47,708,926
0.1%
100%
38,456
50,974,665
0.1%
100%
37,668
53,859,458
0.1%
100%
35
36
contracts allow us to hedge 35% - 45% of total fuel consumption. Our hedge has saved us 214 billion
VND in the three most recent years. For international routes, we apply a fuel surcharge in times of
increased fuel cost.
We have further improved fuel cost reduction measures by implementing a fuel-efficient flight
program in cooperation with IATA. Other measures that have been implemented to control fuel cost
include a flexible management of flight schedule, adjusting ASK/ATK based on marginal costs and
revenues analysis. These adjustments are made on a daily and a per flight basis based on market demand
and cost saving measures, which subsequently improve our load factor efficiency.
Outsourced expense
Outsourced expenses represent the largest source of expense in our cost structure (from 32,8% to
43,5% of our annual total cost, with a 41,1% average). During the period, we saw an increase in
outsourced expense, primarily due to a re-classification of in-flight meals from raw material to this
category in 2011. This explains the decrease in raw material components and the correspending increase
in outsourced expense during the previous five years.
The following are categorized as outsourced expenses:
Air traffic control & flight control (including at landing and departure);
Insurance;
Passenger service (in-flight meals and necessities, parking, shuttle bus, air-bridge, air-stair,
among others);
Other outsourced service includes auditing & consulting, utilities and telecommunication.
Total outsourced expense in 2013 was 23,108 billion VND, up 1,548 billion VND (or 7.2%)
compared to 2012. Outsourced transportation vehicle expense was up 13%, mainly due to addional
aircrafts & aircraft engine leases, block-space/seat agreement in the course of increasing our capacity.
Other expense
Employees compensation and depreciation constitute 7.7% and 5.5% of total annual expense
during 2008 2013, averaged 3,000 billion VND and 2,200 billion VND respectively.. Depreciation
for 2013 was 3,400 billion VND, up 22.3% (or 623 billion VND) compared to 2012 due to the additional
aircrafts in operation. Despite of the addional aircraft, workers compensation is down to 93.69%
compared to that of 2012 a result of our increased productivity and cost control measures.
Financial expense is 5 10% of total cost, and its contribution is gradually decreasing in our cost
structure. Financial expense in 2013 was 2,527 billion VND, up 22.2% compared to 2012. Of these,
interest expense and exchange rate expenses account for 1,229 billion VND and 1,126 billion VND,
respectively. We could meet a part of our transactional demand with our diverse foreign currency
revenues sources (6,37% in USD, 49,89% in VND and 43,41% in other currencies).
Average borrowing cost for all domestic and foreign currencies1 loans of Vietnam Airlines in 2013
was 4.2%/year. Since our debt repayment for our Airbus aircraft purchase is guaranteed by the ECA
(European Collectors Association), we can borrow at a stable, competitive rate.
Technology
We consider information technology (IT) a vital tool in our strategic development. IT is an
integrated part of our competitive strategy, especially in our transportational, technical and commercial
1
In VND equivalent
37
operation. Our aim is to build up an innovative IT system that would assist us in improving productivity
and efficiency management.
The following IT projects are currently, or already, being implemented in our management and
operation:
Cloud computing
Electronic office
Office automation
WAN/LAN to connect our domestic and our 50 international representative offices with our
head office and our subsidiaries
As for flight operation management, we used IT solutions provided by LHS, Rockwell Collins and
Jeppensen. The technology we used is pervasive throughout our operating processes, including, flight
planning, scheduling, operation, and crew. All technical operation (MRO, plane status monitoring and
maintenance) is automatized using solutions from Boeing, Airbus, IFR and ARINC.
At our commercial and service operation, we constantly put new technical solutions to work and
to further improve our customer service. We use Sabre technology in our reservation and departure
control process, Frequent Flyer Program by UNISYS, cargo reservation program (CargoSpot) by
CHAMP, Unit Load Device (ULD) management by SITA, World Tracer lost luggage tracker by SITA,
and Skyteam applications.
We have also implemented our integrated management solutions for our Revenue Accounting
system (RAS), General Accounting System (GAS), E-learning, and our contracting and purchasing
order (PO) management. We strive to improve the interaction between the company and our passengers
through our online reservation system, mobile apps for frequent flyers.
The level of technological investment in 2011 and 2012 is 504 billion and 542 billion VND,
respectively. Investment is integrated at the most fundamental level to meet the demand of our
operation. We believe our technological system is comparable to other international airlines.
Our IT investment strategy will be centralized to apply the best practices in aviation procedures ,
creating a seamless operation in our corporation. We are upgrading a number of core system (ground
operation support for for the new generation of B787-9 and A350 aircraft, Information Systems
Administrator - MIS), and Human Resources Management System (HRMS) ...).
In addition, we will also focus on the development of IT as an important technology milestone and,
increased interaction with customers to enhance corporate governance and administration systems. We
will continue to carry out the application and integration of modern Cloud Computing, Mobile
technology and SOA and the construction of a Disaster Recovery (DR) to ensure security and the
continuity of IT applications.
Our fleet
We grew our fleet from 76 aircrafts in the begining of 2012 to 83 aircrafts in late 2013 with a total
investment of 7,477 billion VND in 2012 and 7,107 billion in 2013, respectively. We operate one of the
youngest fleets compared to other traditional airlines (5.4 years on average, compared to 10.2 years for
Japan Airlines, 12.1 years for Thai Airways, 9.9 years for Air France, and 10.1 years for Korean Air),
thereby allowing us to offer our customers a premium travel experience. We are currently investing in
our aircraft interiors, extending seating space, thus creating a more relaxed environment for our
passengers and enhancing our in-flight entertainment program, thereby improving our competitive
position.
38
Our fleet structure is relatively homogeneous, the majority of which are 180 seat A321 (57%),
widebody Boeing B777 and Airbus A330 (23%) and ATR72 and Fokker F70 (20%). Here we saw
similarities with Malaysia Airlines and Philippines Airlines, who operates with 50% 150-180 seat
aircraft in their fleet. Singapore Airlines and Thai Airways has a higher proportion of widebody aircraft,
accounting for nearly 90%.
We plan to introduce lighter, more fuel-efficient aircraft by introducing the Boeing B787-9 and
Airbus A350-900 in our fleet starting from Mid 2015. These are intercontinental ranged modern aircraft
with cutting edge technology, higher fuel saving capability and longer useful life. We expect to commit
8,737 billion VND in 2014, 19,191 billion VND in 2015 and 15,596 billion in 2016 to invest in
upgrading our long-haul fleet to the A350 and B787, therefore extending our capacity and meeting
market demand.
Equipment
We own three dependent ground handling service enterprises at Noi Bai, Da Nang, and Tan Son
Nhat. They are responsible for the organization and the implementation of technical and commercial
services in our operations and for other airlines.
We have actively invested 60 billion VND in 2012 and 55 billion VND in 2013 in handling
equiments. These include airstairs, push-backs, dolly and forklift, power supply units, portable water
supply, lavatory trucks.... These fully supply adequate services for us and other airlines when required.
94% of these equipments are imported from Germany, USA, UK, France, and Japan.
In the period 2014-2018, we plan to invest approximately 606 billion VND in 154 handling
equipments and 459 dollies.
In addition, we also invested in 01 Full Flight Simulator (FFS) manufactured by CAE with a total
investment of 247.5 billion VND for our type rating and recurrent training process for our A320/A321
pilots in Vietnam while saving on training costs in foreign facilities.. With the available infrastructure
in our Flight Training Center, we are also considering a number of joint venture projects with other FFS
users to introduce addional FFS equipments into operation for the purpose of providing training services
for our pilots and other clients.
Research and Development
We prioritse investing and implementation in Research and Development. These are done
pervasively at the fundamental level at each functional department. R&D is delegated to the
departmental level, the details of which are as follow:
Corporate Planning and Development Department: route network and fleet development;
Here our aim is to improve the experience of our passengers services by enhancing our offering to
our customers. We are focusing specifically on the following areas in our R&D:
Further develop our premium product line by making our business class service on long-haul
flight more comfortable;
An overhaul of in-flight connectivity, where passengers can make connection to the ground using
their hand-held devices using wireless internet access. We are popularizing other options to simplify
the check-in procedures for our passengers by giving them more accessibility through our web checkin, while continue to research and implement kiosk check-in and mobile check-in services. We will also
endeavour to expand our interline through check-in contracts to improve the flight-transfer services for
our passengers.
39
Quality assurance
Quality & safety assurance
We have established a stringent internal quality assurance system after combining prevailing
regulations and standards for aircraft operation, maintenance, and ground handling service. This is to
ensure our compliance with the international, domestic and self-imposed safety and quality assurance
regulations. The Quality Management System of Vietnam Airlines are based on the standards and
regulations set by:
Ensuring the safety of our flight operation is the single most important strategic directive for us.
Leveraging our strict adherence to flight safety, our procedures for setting for safety management is as
follows:
A General Safety and Service Quality Assurance Scheme with specific goals is set for each
of our business operation. The implementation of this scheme is monitored and directly
controlled at the following check points: flight operation, maintenance, and ground-handling
service.
IATA Operational Safety Audit (IOSA): We implemented IOSA since 2005 through internal
and independent assessment. The external assessment was done by IATA for our flight
operation, maintenance, and ground-handling services.
We become IOSA certified in 2005 and an official member of IATA on December 5, 2006, and
continually meet IOSA bi-yearly assessment. These are significant contributing factors for our
successful admission into the global alliance SkyTeam on June 10, 2010, which in turn significantly
improves our international market position.
The chart in the following page lays out the basic reporting procedure for our quality control system.
40
The Board of
Management
Crew training
Flight Operation
A/C Maintenance
Ground Operation
Postholder
Postholder
Postholder
Postholder
Operation Control
Safety Quality
Marketing
Sevices Dept.
Technical Dept.
Personnel
Centre
and Security
Flight Crew Division
Corporate
Noibai Operation
Pax Sales&
Centre
Marketing
TSN Operation
Centre
Management
Corporate
Planning Dept.
Industry
Training Dept.
Investment
Danang
Operation
NIAGS
Northern
Regional
Midle Regional
Dept.
Financial
Accounting Dept.
Legal Dept.
TIAGS
Southern
Regional
DIAGS
Technology
Branches
Solid line denotes the production and business activities of Vietnam Airlines
Dashed line denotes the operation of Quality System
41
Information
Requirements from
Control
-Authorities
- Customer
-Codeshare partner
- Internal standard of
Vietnam Airlines
Safety
quality policy
and
objectives
Planning
Quality
process
Corrective
action
Improvement
Implementing
process
Manual
Product and
services of
Vietnam
Airlines
Evaluation and
feedback from
customer
Safety-quality
audit
Corrective
action
Improvement
Solid line denotes the production and business activities of Vietnam Airlines
Dashed line denotes the operation of Quality System
Quality controller
The Safety, Quality and Security department (SQS) is the independent quality assurance body to
ensure that we are compliant with regulations of Vietnam Aviation Administration, other aviation
organizations and associations (ICAO, IATA) and our own internal policies.
Sales and Marketing
Marketing
Passenger marketing. We budget for our annual marketing expenses based on our short and long
term business directions. Variables on an functional level, such as our business plan, estimated annual
capacity, and revenue for our passenger operation are then taken into account. Our estimation of total
investment we have commited into our branding, advertising, business promotion , and public
relations strategy during 2011-2013 is 710.2 billion VND (VAT excluded), or 10 11% of selling
expenses in the period.
We advertise our services in our focus markets through promotion on a variety of media. This is
done either through our traditional channels (commercial, the Internet, and newspapers) or through
contemporary means (strategically located outdoors billboards, radio, and dedicated television
broadcasts). We are the sponsor of significant political, cultural, art and sporting events. We
continually promote our brand image by implementing unified marketing campaigns on reputable,
high quality media with broad audience and focus on the target and regional markets, creating strong
impressions and resonance.
42
Public relations has been strengthened and is now a core supporting function to our domestic
branding campaign. Our principal approaches to PR is made with thoughtful planning, clear
messages, and contemporary information.We seek to open up a direct communication channel
between us and the market, allowing the public to gain a better understanding of our business.
We have recently further diversified our marketing strategy by running campaigns to promote
Vietnam as a tourism destination in our key markets Korea, Japan, Shanghai, and Western Europe.
Since these are usually done in an coordinated effort with our government, these campaigns have
created a strong impression of our image as the go-to airlines when it comes to travelling to Vietnam
among the community.
Cargo marketing. We also conducted promotions on our cargo operations through a combination
of customer care services, tours, customer meetings, souvenirs, exhibitions, fairs, seminars, sporting
events and fare sponsorship. We believe these efforts have strengthened the dialogue between us and
our clients, and increase our sales volume as a result.
Sales and Distribution policy
Our sales and distribution policy is targeted at two demographics: individual passenger and
corporate client.
Loyalty program. Our Loyalty Program Golden Lotus Plus is a scheme designed to recognize
and reward individual customers. GLP offers additional convenience and features to passengers, thus
incentivize them to increase their use of our flights and our partners services. GLP has been one of
our key marketing tools to build customer loyalty, and we plan to focus on attracting additional
members to this scheme in the near future.
Corporate Account. Our Corporate Account is dedicated to our business clients, offering them
preferential rates and services for businesses wishing to commute on our flights. This program is
designed to encourage businesses to use our services while enjoying tailored treatments catering to
their needs.
We also offer our passengers with a diversified range of products:
Free independent travelers (FIT passengers): We have put in place a wide, flexible price
range in response their needs. Economically minded customers who plan to travel early can
purchase our fare at a discount, while customers without a clear itinerary can get fares
adjusted accordingly to suit their travel plan.
Group Visitors: We offer separate group fares in conjunction with our partners travel
package. Such policy is usually adjusted based on the package and destination.
Visiting friends and relatives: We offer a low price range and increase baggage allowance
for this segment.
Other passengers with special needs (students, migrating workers and marine crew): We
offer a separate fare scheme according to the length of stay, amount of luggage and other
relevant considerations.
43
Brand
Patent
Stork Logo
Patented in Vietnam and China
Patented in 46 countries
Patented in Vietnam
Ongoing contracts
For a list of ongoing contracts and commitments relating to our future operations, including
information about aircraft purchase/leasing, codesharing agreement, financing and outsourcing
contracts See Appendix 3: List of major ongoing contracts.
Selected financial and operating data
The following tables summarize the parent company financial and operating data for our business
for the periods presented.
2008
In million VND
For the year ended December 31
2009
2010
2011
2012
2013
26,576,392
32,130,797
38,513,744
48,546,212
55,499,526
59,336,454
6,019,577
6,753,009
8,445,488
8,266,960
9,291,848
10,015,808
Calculated by Standard No. 410 on the Balance Sheet, not including Bonus and Benefits
44
2008
Total Liabilities
Short-tem debts
Overdue
Long-term debts
Overdue
Receivables
Bad debts
Short-term
receivables
Long-term
receivables
Employment data
Number of employee
Total employee
expense
Average
compensation
Pilots
Stewards
Others
Profit and Loss
Statement Data
Total revenues 7
Net revenues
Total expenses
Pre-tax profit
After-tax profit
Income tax expense
Cashflow
Statement Data
Cash from operating
activities
Cash from investing
activities
Cash from financing
activities
Operational ratios
Capital structure
Long-term
debt/Equity
TotalLiabilities/
Equity
Equity/
Total Assets (%)
TotalLiabilities/Total
Assets (%)
Long-term assets
investment ratio
(%)
7
In million VND
For the year ended December 31
2009
2010
2011
2012
2013
20,459,154
1,696,741
13,790,871
3,642,378
25,376,196
2,251,654
17,226,441
7,031,118
30,066,247
4,608,207
17,489,772
9,245,357
40,277,881
4,511,909
26,559,662
10,107,716
46,206,403
6,862,131
29,653,646
8,255,221
49,319,904
6,653,146
31,189,127
11,662,524
2,324,364
2,964,749
5,574,404
6,166,206
4,790,976
6,519,753
1,318,014
4,066,369
3,670,953
3,941,510
3,464,245
5,142,771
10,285
8,642
9,517
10,062
10,222
10,109
1,361,442
1,212,995
1,806,406
1,850,370
1,991,033
1,860,550
42,863,071
9,885,171
10,128,581
46,635,259
10,214,231
10,764,881
77,802,000
18,412,000
13,535,000
81,580,000
19,133,000
11,540,000
79,323,000
19,239,000
11,583,000
74,840,886
18,743,054
10,358,273
1,440,906
1,899,733
431,527
(2,817,403) (10,285,209)
(2,689,672)
(1,654,204)
5,061,176
2,499,334
(2,340,579) (10,340,068)
(4,528,518)
2,549,622
7,701,968
1,543,119
3,634,491
5,441,344
1,308,282
2.31
2.57
2.09
3.23
3.2
3.14
3.40
3.76
3.56
4.87
4.97
4.92
22.65
21.02
21.93
17.03
16.74
16.88
76.98
78.98
78.07
82.97
83.26
83.12
80.72
83.61
76.11
82.00
86.64
85.49
Liquidity ratios
Current ratio
Quick ratio
Total liquidity ratio
Profitability ratio
Return on Asset
Return on Equity
Return on Sales
Total Asset Turnover
2008
In million VND
For the year ended December 31
2009
2010
2011
2012
2013
0.78
0.63
1.30
0.66
0.55
1.27
0.74
0.67
1.28
0.64
0.60
1.21
0.45
0.42
1.20
0.48
0.45
1.2
0.57%
2.52%
0.60%
0.95
0.42%
1.99%
0.58%
0.72
0.82%
3.72%
0.89%
0.92
0.08%
0.44%
0.08%
0.92
0.25%
1.49%
0.28%
0.89
0.25%
1.47%
0.28%
0.88
Asset Growth
Our growth in asset is due to the recognition of additional aircraft purchase, mainly ATR72 and
Airbus 321. In particular, we invested 9.870 billion VND in our fleet in 2011, an increase of 162.6%
compared that of 2010.
From 2008 to 2013, our total assets grew by 16%/year, with 2011 being the highest (26%). Total
assets as of December 31, 2013 was 59.336 billion VND, 2.4 times that of the beginning of the fiscal
year 2008.
The following table sets forth data regarding our total assets growth compared to revenues and
equity for the period indicated.
In thousand billion VND
For the fiscal year ended December 31,
Total assets . . . . . . . . . . . . . . . . . . . . . . .
Net revenues . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . .
Assets growth rate . . . . . . . . . . . . . . . . .
2008
2009
2010
2011
26,576
25,192
6,020
8.12%
32,131
23,061
6,753
20.90%
38,514
35,342
8,445
19.87%
48,546
44,528
8,267
26.05%
2012
2013
55,500 59,336
49,142 52,460
9,292 10,016
14.32% 6.91%
Assets structre
During 2008 2013, we saw an increasing proportion of fixed assets our assets composition. For
the financial year ended December 31, 2013, fixed assets constitute 85.5% in our assets structure,
while current assets make up 14.5%. Those numbers in 2008 were 80.7% and 19.3%, respectively.
In line with most airlines, aircraft and aircraft engines are the largest category in our fixed assets
(corresponding to 97.1% of total fixed assets and 54.5% of total assets). The residual value of aircraft
and aircraft engines by the end of financial year ended Decmeber 31, 2013 is 34,372 billion VND
(97,3% of total fixed assets).
Capital structure
Our main source of capital comes from the liability side of the balance sheet. Total Liabilities
averages 80.6% of our Capital, of which Short-term debt and Long-term debt constitute 28.3% and
52.3%, respectively. As of December 31, 2013, we recorded 49,320 Billion VND of total outstanding
liabilities, where interest bearing loan made up 63.8%, or 37,842 Billion VND in absolute term.
There was a gradual shift to Liabilities in our Capital structure in the 5 years prior to equitization.
Equity decreased from 23% by the end of 2008 to 16.9% in 2013 year end. We are committed to make
major renovation to our fleet to boost capacity in anticipation of rising transport demand. In doing so,
we utilize a high degree of leverage, and subsequently, the increase in Total Assets is mostly funded
by debt and not equity.
46
Equity
Our asset growth is partially funded by equity, mostly from retained earnings and the national
budget. Equitys annual growth rate in the 2008 2013 period is 9.4%, and on a five year-average,
19.4% of total assets were funded by equity. The main reasons for equity increases are:
States funding for Cambodia Angkor Air project (1,216 Billion VND);
Receiving the transfer of State capital in Jet Star Pacific from SCIC in early 2012 (921
Billion VND); and
Retained earnings.
Equity experiences a lower growth rate compared to that of Total Assets, which causes the
equity/total assets to steadily decrease for the period 2008 - 2013.
Debts and loans
We have been intensively focusing on the development of our fleet in the last 5 years with an
investment plan stretches until 2020, pursuant to the approval from the Prime Minister. Our long-term
debt increased as a result, growing at a 5-year average rate of 18.8%. The total outstanding balance of
financial lease as of December 31, 2013 is 37,820 billion VND (of which, long-term loans and finance
lease due next year is 6,631 billion VND).
The following table sets forth our debt structure for the period between the fiscal year ended
December 31, 2008 and December 31, 2013:
Short-term debts/Total capital . . . . . . . . . . . . . . . . .
Long-term debts/Total capital. . . . . . . . . . . . . . . . . .
2008
0.06
0.52
2009
0.07
0.54
2010
0.12
0.45
2011
0.09
0.55
2012
0.12
0.53
2013
0.11
0.52
Funding for our aircraft expansion8principally comes from long-term financial instruments.
Aircraft financing accounts for 99% of our long-term borrowings, the other 1% are loans to finance
technological acquisition of ground-based assets and training facilities directly related to our flight
operations (hangars, aircraft maintenance workshops and pilot trainning). We mostly contracted
foreign financial institutions through Export Credit Agency (ECAs), and our obligation to pay is
guaranteed by the Government of Vietnam.
While an increased leverage could potentially pose risks to our operations, we believe that we
can utilize a higher degree of leverage due to certain unique characteristics of the air transportation
industry. Our passengers has to offer full payment before service, while payments for jet fuel, landing
fees, and flight control and monitoring could be made within a month of accrual. These allows us to
maintain adequate liquidity position and provide additional funding for our working capital when our
equity is not keeping up with our growth.
Liquidity
Our a limited equity capital not commensurate to our operations, our need for capital to develop
our fleet, and the unfavourable trading conditions worsened our liquidity measurments recently.
Regardless, we always maintain a higher than 1.00 total liquidity ratio and long-term debt solvency
ratio. Our current ratio and quick ratio respectively decreased from 0.78 and 0.63 in 2008 to 0.45 and
0.42 in 2012, and saw a slight improvement in 2013.
It should be noted that our accounts payable is primarily prepayment from our passengers. This
partially contributed to our lowered liquidity position, and is an industry characteristic. Our current
and quick ratio after excluding account payables in the form of prepayment is 0.76 and 0.7 in 2013,
respectively. To control for liquidity risks, we have implemented a cashflow management system,
8
Our strategy for expansion has been officially sanctioned by the Vietnam government.
47
with a focus on expenditures and revenues forecast, active management and flexible cash control.
This allows us to meet our obligations without any overdues.
Profitability
The last five years was a challenging period for the global airlines industry. Japan Airlines
declared bankruptcy in 2010, while Malaysia Airlines saw three years of continuous losses, Cebu
Airlines made losses in the last two quarters of 2013 and Thai Airways made losses in 2011 and 2013.
In contrast, we had a net income of 933 billion VND for the period. This is the result of a coordinated
efforts of our Group as a whole.
Except for 2009 when our performance was impacted by the the economic downturn, we
experienced an accelerating revenue growth rate during the last 6 years. Transportation revenue
growth is also higher than transportation volume growth.
The global economic crisis, the decline in domestic economic growth reflected in the decrease
in travel demand, the volatilities of jet fuel expenses, exchange rates fluctuations, among others, have
a material impact on the stability of our bottom line in recent years. During the six years before
equitization, our net profits figure was highest in 2010 (314 billion), and lowest profit in 2011 (36.6
billion VND). This reflected the fluctuations in the USD/VND exchange rate, which in turn increase
our operating expense. For the fiscal year ended December 31, 2013, we achieved a net profit of 157
billion VND, a 14% increase compared to that of 2012, or 19.5 billion in absolute term.
The following table compiles information regarding our net income in conjunction with several
profitability ratios for between the fiscal year ended December 31, 2008 and December 31, 2013.
2008
Net income . . . . . . . . . . . . . . . . .
ROA . . . . . . . . . . . . . . . . . . . . . .
ROE . . . . . . . . . . . . . . . . . . . . . .
ROS . . . . . . . . . . . . . . . . . . . . . .
152
0.57%
2.52%
0.60%
135
0.42%
1.99%
0.58%
314
0.82%
3.72%
0.89%
37
0.08%
0.44%
0.08%
138
0.25%
1.49%
0.28%
2013
158
0.27%
1.57%
0.30%
48
2008
2009
2010
2011
2012
2013
Passengers &
Cargo operation
Transportation
support
Others
Deductible
revenue
Net revenues
24,837,256
22,535,637
34,941,825
44,285,248
50,983,602
53,917,167
1,297,074
1,600,102
2,217,769
2,160,644
2,024,711
3,233,452
11,574,300
8,628,199
9,469,243
10,371,236
12,291,869
12,077,693
(96,250)
(155,268)
(275,248)
(352,174)
(441,670)
(373,800)
37,612,380
32,608,670
46,353,589
56,464,954
64,858,512
68,854,512
0.26%
0.47%
0.59%
0.62%
0.68%
0.26%
99.74%
99.53%
99.41%
99.38%
99.32%
99.74%
........
.......
........
........
........
........
In percentage
2008
2009
2010
2011
2012
2013
........
.......
........
........
........
........
65.87%
68.78%
74.94%
77.94%
77.26%
65.87%
3.44%
4.88%
4.76%
3.80%
4.13%
3.44%
30.69%
26.33%
20.31%
18.25%
18.61%
30.69%
Revenues growth
Except for the decline in 2009, our Group experienced double digits revenue growth in the last
six years at an average rate of 16.45%/year. Revenue growth for the fiscal year ended December 31,
2010 and 2011 were relatively impressive at 42.2% and 21.8%, respectively. Revenues in the fiscal
year ended December 31, 2013 reached 68,855 billion VND, an increase of 6.16% compared to that
of 2012.
The following table set forth our revenues growth according to each of our business segment for
the period between the fiscal year ended December 31, 2008 and December 31, 2013.
Fiscal year ended
December 31,
Passengers &
Cargo operation
Transportation
support
Others
Deductible
revenue
Net revenues
2009. . . . . . . . .
2010. . . . . . . . .
2011. . . . . . . . .
2012. . . . . . . . .
2013. . . . . . . . .
-9.27%
55.05%
26.74%
13.93%
6.87%
23.36%
38.60%
-2.58%
24.74%
19.97%
-25.45%
9.75%
9.53%
17.17%
-0.61%
61.32%
77.27%
27.95%
25.41%
-15.37%
-13.30%
42.15%
21.81%
14.87%
6.16%
50
Revenue from air transport accounted for 66-78% of total revenues in the period, followed by
revenue from sale of goods and services (17.5-31%). Ancilliary activities constituted a portion of 35%.
Air transport is our largest revenue line, and its contribution increased from 65.8% for the fiscal
year ended December 31, 2008 to 77.8% for the fiscal year ended December 31, 2013. During the
period, the average revenue growth by business lines are respectively 18.7% per year for our air
transport operations, 20.8% per year for ancilliary and 2.1% per year for sale of goods and services.
Revenue contribution of parent and subsidiaries
Total air transportation revenue of the parent company accounted for approximately 96% of
group air transportation revenue. The rest comes from our subsidiaries, namely Cambodia Angkor Air
and Jetstar Pacific Airlines.
In 2013, the parent companys air transportation revenue contribution to total group air
transportation revenue dropped to 95.3% and 96.7% compared to 2012 due to recognition of revenues
from Jetstar Pacific Airlines.
30% of group ancilliary revenues comes from our subsidiaries. The majority of our ancilliary
transportation activities is done within the parent company, contributing 69.6% on average to group
revenues in this segment in the period 2008 - 2013.
Other operations of our Group are conducted mainly from subsidiaries. These are revenues from
direct or indirect support operation with regard to our the core business in the Group. Our
subsidiaries operations were developed based on our air transport business and other airlines
operations, and their revenue were dependent on the volume of passengers coming into and out of the
country. Their revenues contribution were relatively stable over the recent years. Due to our focus on
investmenting into our core business, an increase in our transportation revenue means a decrease in
the contribution of others in our revenue structure (down from 26% in 2008 to 17% in 2013).
Cost structure
Our Group cost/revenue ratio is 99%. The largest cost component in our cost structure is cost of
goods sold, accounting for 89.5% of net revenues, creating a gross profits margin of 10.5% on
average. We achieved our highest level of gross profits margin in the last five years in 2010 (nearly
14%), during which the parent company increased our scale of operations, open new routes leading to
a reduction of fixed cost in our cost structure. Combined with a moderate price level for jet fuel
during the year, we achieved a lower cost base in 2010. In 2011 and 2012, prices of jet fuel had a
significant influence on the Group gross profit margin (which was reduced to 9.2% and 8.3% in 2011
and 2012, respectively). 2013 was the year where we saw a moderate levels of volatility at a high
price level for our raw material, leading to a gross profit margin of 10.5%, the average level in recent
years.
The contribution of financial expenses decreased from 8% of total revenues in 2008 to 4% of
total revenues in 2013. This is due to lower foreign exchange expenses, a result of the the State Bank
of Vietnams directive to maintain a stable exchange rate. In the 2008-2011 period, interest expense
represents approximately 30% of the financial expense; the remaining 70% is from foreign exchange
expense. During 2012-2013, interest expense now make up 50% - 70% of the total financial expense.
The decrease in total financial expense is mainly due to the decrease in expense resulting from
changes in exchange rate. Interest expenses to finance our aircraft and engines purchasing and leasing
agreements increased from 881 billion to nearly 1,400 billion VND (an average increase of 9.6% per
year in 2008 2013), while expenses from exchange rate differences on average went down from
nearly 1.927 billion in 2008-2011 to 590 billion in 2012 and 1.309 billion VND in 2013.
The proportion of sales and management expenses is stable compared to revenue. We have kept
our administration expense steady, accounting for 3.2% on average in 2008-2013 revenues, while
selling cost during 2008 - 2013 is approximately 5.4% of total revenue. The increase in selling
expenses in 2010 is due to our expansionary strategy in anticipation of the economic recovery. Our
51
increased revenue in matched by a sharp increase in selling expenses, from 1.860 billion to 3.178
billion VND (up 70%).
Net profit
Profit after tax of the Group peaked in 2010 at 810.2 billion VND (closely match parent company
revenue growth). In the fiscal year ended December 31, 2012, groups profit fell to 142.7 billion
VND, down 40.6% compared to that of 2011. In 2013, Group profits increased by 80.5% compared to
2012 to 258 billion VND. The average contribution the parent company to group profits is 45%, that
number for the subsidiaries is 55%. Detailed information about the financial position and operating
results of subsidiaries are presented in Appendix 01.
Group financial performance
The following table sets forth information regarding the Group financial performance during the
fiscal period 2008 2013.
In Million VND
2009
2010
2011
2012
2013
Total assets . . . . . . . .
28,947,956
Equity9 . . . . . . . . . . . .
6,599,520
Total liabilities . . . . . .
21,762,484
Short term debt . . . . .
7,757,268
Long term debt . . . . .
14,005,216
Receivables . . . . . . . .
4,233,153
Short-term
3,005,827
Receivables . . . . .
Long-term
1,227,326
Receivables . . . . .
Total revenue10 . . . . .
39,603,010
Net revenue . . . . . . . .
37,612,380
Total cost . . . . . . . . . . (38,977,887)
Profit (loss) of
subsidiaries &
13,118
affiliates . . . . . . . . . . .
Profits before tax . . . .
638,241
Profits after tax . . . . .
444,377
ROE . . . . . . . . . . . . . .
6.73%
Cash flow from
600,086
operating activities . .
Cash flow from
investing activities . . . (3,328,248)
Cash flow from
1,389,927
financing activities . .
35,428,606
7,478,190
27,531,812
10,080,432
17,451,380
8,229,773
43,056,781
8,981,224
33,557,196
15,807,439
17,749,757
10,453,272
56,382,540
8,791,576
47,050,149
20,160,851
26,889,298
11,393,075
64,723,383
9,640,025
54,573,279
24,354,420
30,218,859
9,996,507
69,643,732
10,246,585
58,940,773
26,654,675
32,286,098
12,852,105
4,163,230
6,782,265
7,451,565
6,529,712
7,706,783
4,066,543
3,671,007
3,941,510
3,466,795
5,145,322
34,303,828
32,608,670
(33,664,818)
48,717,186
46,353,589
(47,716,560)
59,708,706
56,464,954
(59,286,635)
66,876,443
64,858,512
(66,541,731)
70,343,873
68,854,512
(69,804,630)
14,867
12,540
(6,263)
56,002
(32,722)
653,877
483,200
6.46%
1,013,166
810,240
9.02%
415,808
240,592
2.74%
391,074
142,691
1.48%
506,519
257,535
2.51%
(1,411,986)
1,911,091
1,985,663
4,738,898
2,448,441
(2,470,984)
(3,648,041)
(10,236,458)
(10,682,014)
(4,943,453)
3,681,547
3,431,873
10,285,408
5,508,202
2,038,083
Assets growth
Total assets for the fiscal year ended December 31, 2013 is 69.643 billion VND, an increase of
40.695 billion compared to the the fiscal year ended December 31, 2008. The average growth rate of
total assets in this period was 19.5%/year, of which the highest growth rate achieved in 2011 of
30.9%, compared to 2010.
Calculated based on 410 Standard on our Balance Sheet, not including Provisions for Salaries & Benefits
Include: net revenues, financial revenues and other revenues
10
52
The following chart summarizes our Group assets growth rate in comparison with our revenue
and equity growth:
Asset structure
Asset structure for our Group during 2008 - 2013 was relatively stable. Fixed assets over current
assets ratio is approximately 75/25, consistent with our focus on investment in anticipation of a
recovering economic cycle. Compared with the asset structure of the parent company (85% fixed/15%
current), the Group as a whole has a higher proportion of current assets. This is because the parent
company operates solely in the air transportation industry, and therefore fixed assets should dominate
in its assets structure. This is the reverse for our subsidiaries operating in the service sector, who
should have a more balanced asset structure due to their industry specifics and higher level of asset
utilization.
Capital structure
During 2008 2013, our accounts payable tended to increase. For the fiscal year ended
December 31, 2008, total liabilities over total capital ratio was 75%; this figure as at December 31,
2013 is 85%. This is due to our investment in aircraft and engines funded principally by long-term
borrowing instruments. In 2011, long-term debt increased by 51% while equity saw little change, thus
causing in an increase in our financial leverage.
Another contributor to our Group increased leverage is the significant debt levels of our
dependent unit - VINAPCO. The company specializes in the import and distribution of jet fuel,
therefore requiring a high level of working capital (Total Liabilities over Total Capital ratio was
93,75%). Despite its high debt level, the company does not pose huge risk in our investment due to
stable jet fuel demand and its dominant position as a jet fuel supplier.
Debt structure
During 2008 - 2013, total short-term debts and long-term debts of the group is approximately
74% of total liabilities, of which long-term debts accounted for 53% - 63% and short-term debts
accounted for 10% - 21%. There were structural changes in the group debt financing. Before 2010, the
proportion of long-term loan/short term loan was at 86/14; this stabilize at 72/28 after 2010 - similar
to the proportion long-term over short-term assets (at 75/25). This balanced capital structure is
consistent with the States directive and guidence on the investment of States capital.
53
Share Capital
The increase in our share capital is matching our Group expansion strategy and mostly comes
from retained earnings and the parent entity. Our Groups average growth rate in Share Capital for the
fiscal years from 2008 to 2013 was 13.1%
Liquidity
The Groups current ratio and quick ratio decreased in the 2008-2013 period, from 0,9 and 0,7 in
2008 to 0,7 and 0,5, in 2013. This is due to our fleet renovation project, which was mostly funded by
debt instruments and not equity. In addition, our Group liquidity is also affected by the recognition of
Jetstar Pacific Airlines debt level and asset structure on our balance sheet and significant short-term
debt level at VINAPCO, as mentioned previously to finance for short-term assets in the form of fuel.
Due to the commercial aviation industry convention of collecting payments before service, our
payables mostly consist of fares purchased by but not yet transported passengers (68% of account
payable in the 2009-2013 period). Excluding this item, our current ratio and quick ratio for the fiscal
year ended 2013 was 0,9 and 0,6, respectively.
Profitability
Compared with the period 2010 - 2012, EBITDA/revenues increased from a of 8% average from
2008 to 2012 to 8.2% for the fiscal year ended December 31, 2013. Our Group consolidated profit
after tax increased by 80% in 2013 compared to 2012 due to the strong performance of our core
business. Our ROS for the fiscal year ended December 31, 2013 was 0.4%; average ROE for the
period from 2008 to 2013 was 5%, the highest was in 2010 at a rate of 9%.
The following chart set forth our Group profitability for the reporting period from 2008 to 2013:
54
55
56
11
International market
Vietnam holds an unique locational advantage as the gateway for flights orginating from
Northeast Asia, Southeast Asia, Europe, the South Pacific and China. At the end of the year 2013, our
international network consisted of 52 routes to 29 destinations in 17 countries, and our domestic
network consisted of 40 routes to 21 destinations. We have been rapidly expanding our reach, and are
now serving destinations in Europe (France, Germany, UK, Russia), Northeast Asia (Japan, South
Korea, China, Taiwan) and the CLMV sub-region. According to internal market research, we flew
40,6% of Vietnam international passengers volume. Competitors such as Thai Airways and Singapore
Airlines accounted for 3,8% to 3,6% of the market share.
European market. Except for the HAN/SGN-MOW and SGN-CDG route,we are the only airlines
flying direct routes HAN-CDG, HAN/SGN-FRA, and HAN/SGN-LGW. Due to long distance,
traveller often prefers to combine many destinations, our high frequency network connecting Vietnam
and five destinations in the CLMV sub-region is our core competitive advantage in this segment.
Northeast Asia market. We offer high frequency services at 1-2 flights/day/route with a higher
number of destinations compared our direct competitors. Our high frequency services to CLMV subregion strongly complement this market segment. We can continue to offer new routes linking the
Northeast Asia with potential destinations in Central Vietnam, increasing our competitive advantage.
The liberalization of South Korea and Japan labor market creates potential opportunity for Vietnam
Airlines to explore the labor segment.
Southeast Asia and Australia. Our flights frequency of 2-3 flights/day connecting
SIN/BKK/KUL is well positioned to take advantage of the stable regional tourism growth. Our
services in this market also enable convenient connecting flights to Europe and North East Asia.
Vietnam Airlines is the only airline offering direct flights connecting Vietnam and Australia.
CLMV region. We operate a high frequency route network connecting the main hubs in the
CLMV sub-region. We can also combine our services with K6 firm to extend our network. CLMV
continues to be regarded as our core competitive advantage, especially for visitors coming from
Japan, Korea and Europe wishing to tour Vietnam in conjunction with other regional attractions. Our
high-frequency network and excellent service in this region allow for convenient flight transfer
opportunity to passengers from our key markets in Europe and North East Asia, making the region an
essential competitive leverage.
International and domestic industry prospects
The global aviation industry
According to data from the International Air Transport Association, in 2013, the global aviation
industry witnessed a growth in revenue of $710 billion, an increase of 4.6% compared to 2012.
Industry profitability has bounced back to pre-crisis levels. Total profit after tax of the industry in
2013 reached 10.6 billion, netting a 1.5% growth compared to $6.1 billion and a net profit margin of
0.9% in 2012. This is also the 4th consecutive year when the airline industry achieved positive
earnings results.
The growth driver in world commercial aviation industry stems mainly from passenger
operations. After a period of economic downturn, while passenger transportation is seeing some
recovery, cargo operationsgrowth is much slower due to shrinking industrial production, especially in
the context of the Eurozone public debt issues. Demand for passengers air travel customer grew at the
rate of 5.5%, from 2.977 million passengers in 2012 to 3.141 million passengers in 2013. Global
RPKs achieved a 5.7% growth rate.
Industry revenues, (Billion USD) . . . . . . . . . . . . . . . . . . . . . . . . .
Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Passengers volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58
2012
2013
2014E
679
9.8%
2.977
4.6%
710
4.6%
3.141
5.5%
746
5.0%
3.320
5.7%
5.523
5.3%
187
-1.0%
2.5%
1.9%
5.839
5.7%
191
1.8%
2.4%
2.7%
6.183
5.9%
197
3.1%
2.8%
3.6%
Source: IATA
As the global economy is showing signs of recovery, air travel demand (including tourist and
business), as well as demand for cargo transportation is forecast to increase. The International Air
Transport Association expects 1% of global GDP will be spent on air transport, raising the total
industry revenue from $ 710 billion to $ 746 billion, equivalent to a 5% growth rate. In particular, the
field of air travel is expected breakthrough is based on the idea of maintaining good growth of 5.9%,
the best since 2011. In addition, cargo with the return to growth of trade activities are expected to
witness the highest growth in four years at a rate of 3.1%.
Prospects for the aviation industry development in Vietnam
According to data reported by the Bureau of Aeronautics Vietnam in 2010 - 2013, Vietnam's
aviation industry to maintain strong growth. The International Aviation Association (IATA) forecasts
Vietnam will become the market aviation growth third in the world in terms of passengers and cargo
transported in 2014.
In 2013, world passenger volume is estimated to reach 29.5 milliond (up 17% compared to 2012)
and the cargo market is estimated to reach 630 thousand tons (up 19.6% compared to 2012). In the
period 2010 - 2013, the average growth rate of passenger transport and freight transport respectively
14% and 16%. Located in the region of South East Asia, Vietnam's market witnessed strong demand
growth in passenger and cargo transport.This further promotes the development of the countrys
aviation industry.
According to the Vietnam National Tourism Development Scheme: A 2030 vision, by 2020,
the country will attract 10.5 million international passengers, serving 47.5 million domestic arrivals.
By 2030, Vietnam will welcome 18 million foreign tourists and 71 million domestic tourists. In 2020,
total revenue from tourism would reach $18.5 billion, accounting for 7% of GDP, and in 2030, that
number would be $35.2 billion, accounting for 7.5% of GDP. The tourism industry is forecast to reach
an average growth rate of over 30% in terms of revenue and 20% in passenger traffic. An increasing
travel demand is still the main driver for the industry, as air transportation become faster and more
convenient, while its expense is approaching that of other means of transportation, namely personal
vehicles or trains. Tourism growth is an important source of income and will be a driving force in the
development of the air transport industry in Vietnam.
Our current strategic direction is consistent with industry trends, government policies and the
global competitive landscape
According to the afore mentioned development scheme, we will become an airline with strong
financial capability and brand name in the Asian airline industry. The parent company will hold a key
operating role, with ancillary services be conducted from subsidiaries and joint ventures.
Our overall direction is to implement a dual brand strategy. The parent company will develop its
full services airline strategy by continuing to expand its network to major financial and economic
centers; its targeted market would be high yield passengers, business travellers and tourists. Jetstar
Pacific will compete in the low yield market, focusing primarily on the local and regional segment.
Pursuant to Decision No. 21/QD-TTg of the Prime Minister approving the development strategy
of the commercial air transportation industry in Vietnam, we are to become the main driving force
behind the development of the industry in Vietnam, and further affirming our brand presence in the
region. Jetstar Pacific Airlines will focus on the low yield segment in the domestic, Northeast Asia
59
and Southeast Asia market. Our development is thus consistent with the Vietnam government
policies.
This strategy is a industry-wide trend, and has been successfully carried out by airlines such as
Singapore Airlines (SIA). The parent company (SIA) operates in the premium travel market, while
Tiger Airways taps revenue from the low yield segment.
60
www.vietnamairlines.com
Lines of business
The lines of business are defined in our draft Company Charter, based on our current operations
as regulated in Decision No.172/QD-TTg dated January 16, 2013, Decision No.183/2013/ND-CP
dated November 15, 2013, our Certificate of business registration, and several additional auxiliary
lines of business. The proposed post-IPO business lines are as follows:
Core businesses
Air transport for passengers and cargo (luggages, goods, parcels, letters);
Supporting services of air transport: general flights (for aerial photography, geological
surveys; extended flight route calibration; repair and maintenance of high voltage lines; oil
and gas service; afforestation; environmental monitoring; search and rescue; emergency
medical service; missions serving political, economic, social, security and defense
purposes), other specialized flights, commercial services such as tourism, hotels, duty free
sales in isolated area of international terminal, in-flight and ground services, ground
engineering services, services in the passenger area and cargo terminal, and apron services
at the airport);
Repair and maintenance (aircraft, engine, spare parts, aircraft equipment, equipment for the
ground engineering business and other technical equipment);
Related businesses
Other supporting services relating to transport (Freight forwarding; investing and operating
airport infrastructures, including passenger areas, cargo terminal, technical infrastructure
and synchronization services in the aviation transport chain; multimodal transport);
Production of aircraft, spacecraft and related machinery (Exports and imports of aircraft,
engines, spare parts and aviation equipment) and other items prescribed by the State;
Production, imports and exports of equipment to serve the air transport chain; Rent, lease,
purchase and sale of aircraft, engines, spare parts, aviation equipment, training devices and
other equipment to serve the aviation transport chain;
Publishing
Restaurants and catering services (Production, exports and imports of food and beverages);
Wholesale, exports and imports of solid, liquid, and gaseous fuels and other relating
products (Gasoline supply, aviation grease including fuels, lubricants and special liquids
and other gasoline in airports);
Brokerage and auction agency (retail gasoline dealer; agency services for airlines, aircraft
manufacturers, engine, equipment and aircraft spare parts producers, transportation
companies, domestic and international tourism);
Construction;
Architectural business and related technical consulting (construction consulting does not
include business design)
Supply and management of labor force, including labor supply (excluding brokerage,
referral, employment and labor supply for businesses with labor export and import function
or managing workers abroad); Export and import of labor as per government authoritys
permission;
Capitalization
Size of capitalization
Share capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,101,840,000,000 VND
Par value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 VND
Number of shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,410,184,000 shares
Capitalization structure
The State . . . . . . . . . . . . . . . . . . . . . . . .
Employees . . . . . . . . . . . . . . . . . . . . . . .
Shares sold to employees in accordance
with their seniority . . . . . . . . . . . . . .
Shares sold to employees in accordance
with working commitment . . . . . . .
Number of shares
(shares)
Proportion
1,057,638,000
20,795,100
10,576.38
207.95
75.00%
1.475%
11,320,600
113.21
0.803%
9,474,500
94.75
0.672%
62
Trade Union . . . . . . . . . . . . . . . . . . . . . .
Strategic investors . . . . . . . . . . . . . . . . .
Public Auction . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shares
(shares)
Proportion
705,092
282,036,800
49,009,008
1,410,184,000
7.05
2,820.37
490.09
14,101.84
0.050%
20.00%
3.475%
100%
All of our shares at the time of establishment are common shares. The sales, purchase, transfer
and inheritence of those shares will comply with the Charter of Joint stock companies and other
relevant law documents.
Proposal for charter capital change after the IPO
After the IPO, apart from retained earnings for the period from 2014 to 2018, we plan to increase
the charter capital by issuing shares for foreign strategic investors, and/or issuing shares in domestic
and international markets to reduce the State ownership to no less than 65%.
Proposed organizational structure
Our projected organizational structure after transforming into a joint stock company is as
follows:
The Committees: are established by the Board of Directors for assistance, including
Strategy and Investment Committee, Compensation Committee, Internal Audit Committee,
Finance Committee and other committees as decided by BOM. Except Internal Audit
Committee has its own dedicated delegates, the remaining committees are concurrent
positions. Our specialized departments will assist those committees formed by the BOM in
accordance with their functions;
The President and CEO: is the legal representative of Vietnam Airlines and is appointed by
the BOM among its members.
Assistants to The President and CEO: include the Vice Presidents, Chief Accountant,
offices, functional departments, unit and the equivalence, functioning as advisors and
assistants to the President and CEO in management and administration.
The following chart sets forth our projected organizational structure after IPO:
63
GENERAL MEETING OF
SHAREHOLDERS
SUPERVISORY BOARD
BOARD OF MANAGEMENT
SECRETARIAT
Training Dept
Legal Dept
IT Dept
Corporate Affairs
Investment dept
COMMERCE DIVISION
Operation Control
Center
Northern Regional
Branch
Center
TanSonNhat Operation
Oversea Branches
(32)
company (VASCO)
Dept
Vocational Center
services
Middle Regional
Branch
Southern Regional
Branch
TECHNICAL DIVISION
Heritage magazine
services
TanSonNhat ground
handling services
64
Subsidiaries &
Associates
goal of an ASEAN Single Aviation Market - ASAM in 2015. Accordingly, it will be easier for foreign
airlines to expan their operation to and from Vietnam.
Strategic plan for corporate development
Mission and strategic directions
Our mission
We strive to become the leading corporation in Vietnam air transport industry with powerful
economic strength and highly prestigious position in the CLMV sub-region. For our well-established
infrastructure and advanced expertise, we endeavor to rank among high-caliber airlines in South East
Asia. We wish to bridge the countrys international relations and contribute significantly to the socioeconomic development of Vietnam by operating effectively and serving as a reliable preliminary force
for national security.
Our strategy
Maintain our leading position in the national airline industry. We aim at superior economic
performance accompanied by effective implementation of political tasks assigned by the
State, including maintaining our key position in the industry, offering services to a wider
public and serving as a preliminary force for national security.
Position ourselves among top airlines of ASEAN region with regards to scale, and hold the
pivotal role in the air transport of the CLMV sub-region; Strive to position Vietnam Airlines
in the market as a reputable brand name.
Take advantage of the internal resources and creating excellent crew of pilots, engineers,
staffs and experts with professional elite, high labor productivity to operate and manage a
large-scale professional airline; expand both domestic and international cooperative
ventures; renovate the management process for a more scientific, modern, and united
system as well as to promote the synergy values throughout the company;
Strive to become one of the most attractive employers in Vietnam for its image of an
industry with high technology and international integration; for the inspirations at work and
for its excellent remuneration package including high and stable income, training
opportunities and career development.
Route expansion
Based on the hub-spoke model, we plan to expand our route network with a focus on connecting
flights through Tan Son Nhat (Ho Chi Minh City) and Noi Bai (Hanoi) international airports at an
increasing frequency. This design aims at gradually turning them into major regional hubs to directly
compete with big hubs like Hong Kong, Bangkok, Singapore, Kuala Lumpur. In addition, we will
gradually enhance the operations at Danang airport step by step to become a complimentary hub for
the main centers in Hanoi and Ho Chi Minh City. Our network expansion plan with regards to each
specific region is as follows:
66
Due to strategic locations and core markets travelling characteristics, in order to save
costs/ASK, Hanoi is designed to be the hub for flights from Europe and Northeast Asia
travelling to Indochina, while Ho Chi Minh City is targeted for connecting flights from the
USA, Europe and Australia to Indochina and Southeast Asia; and between Northeast Asia
and Australia.
North America: We carefully expand our presence in this market in order to maintain the
efficiency of the entire network. In specific, to develop our trans-Pacific network, route
from Ho Chi Minh City to Los Angeles will be inaugurated in 2016 while flights to San
Francisco, Washington and Vancouver will be inaugurated when applicable.
Europe: We will better the curent network to improve traffic mix and increase the
proportion high-yield passenger and will consider to add 1 to 2 new destinations (a new
route to Berlin will be opened in 2015. The other destination will be selectively considered
among Prague/Amsterdam/Milan on the basis of the efficiency of the entire Europe
network.
Northeast Asia: as the most efficient routes for Vietnam Airlines, we plan to further increase
our presence in Northeast Asia. By increasing the frequency to two flights per day and
operating these routes by modern wide-body aircrafts, we believe we can offer a premium
service to our passengers while still remaining competitive in this segment and improve
performance efficiency. New routes plan includes additional connectivity from the
Northeast Asian region to Central Vietnam.
Southeast Asia: We intend to increase the frequency on existing routes to 2 flights per day
and to open new route to Indonesia (expected to Denpasar in 2015) and the Philippines
(expected to Manila in 2015) to better our ASEAN network.
Australia: We are considering to launch direct flights from Hanoi to Australia (Melbourne,
Sydney) and searching for new destinations (expected to Brisbane in 2017 and Adelaide in
2018) to take advantage of its favorable geographical position of Hochimnh city to offer
services to the 6th freedoom traffic right markets from Europe and North East Asia to
Australia.
The Middle East and India: Based on frequent research and review of market situation, we
plan to engage in these markets when the fleet is expanded. Several prospective destinations
include Dubai in 2017, Doha in 2018, Bombay in 2015 and Delhi in 2015.
Domestic routes and the CLMV sub-region play a strategically vital role in our political
duty and operating results. Particularly, we have leveraged our competitive advantage of an
unique location by increasing frequency and using bigger aircrafts to compete effectively
with the main hub Bangkok and long-haul flights to the CLMV sub-region. We plan to
launch new routes connecting Central Vietnam with Indochina to support the core markets
such as America, Europe and ortheast Asia while collaborating with K6 to adjust capacity to
suit the needs of these core markets.
In the domestic market, by collaborating closely with JPA, we desire to maintain both
carriers market share of about 70-72%. Our target is to dominate the full services carrier
market segment and to maintain a fixed market share in the low yield passenger segment.
Meanwhile, JPA will compete directly with other LCCs and strive for the strongest growth
in this segment.
67
2015
2016
2017
2018
59,295
67,824
81,650
95,484
287
327
404
467
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,009
67,496
81,246
95,017
52,560
6,449
364
2,809
2,904
1,401
-301
670
27
642
341
341
0.57%
2.37%
0.52%
4,361
59,303
8,194
401
2,923
3,457
1,568
647
728
31
697
1,344
211
1,132
1.96%
8.75%
1.62%
5,293
69,698
11,549
427
3,697
4,288
1,658
2,333
868
38
830
3,163
602
2,561
3.83%
14.42%
3.33%
5,976
80,927
14,090
455
4,149
4,906
1,778
3,711
969
45
924
4,635
920
3,716
4.81%
18.97%
4.54%
6,873
110,07
3
541
109,53
2
94,054
15,479
487
4,636
5,577
1,892
3,860
1,049
54
995
4,855
961
3,894
4.37%
18.27%
4.50%
7,676
13.9
14.3
15
16
16.3
To ensure the business plan is implemented smoothly and yields greater results, we have
constructed a detailed plan for specific components as follows:
Fleet expansion plan
We plan to restructure our fleet to comprise of 03 main categories:
Aircraft of 280-300 seats (wide body) will be divided into 02 groups classified by their
design flight range as announced by the manufacturer. Long-haul fleet (A350, B787, B777
and the equivalent) will operate on intercontinental routes (including North America,
Europe and Australia); Middle-haul fleet (A330, B787, B777 and the equivalent) will fly to
Northeast Asia and the Middle East.
Aircraft of 150-180 seats (narrow body) will be used on domestic routes, international
routes in Southeast Asia, Northeast Asia, India... with a range of approximately 5 hours
(A320/321 or the equivalent).
Aircraft of 70 seats with moderate capacity will be used to for short-haul flights and for
airports that A320 aircraft cannot access (ATR-72 and open technology).
68
2014
2015
2016
2017
2018
280-300 seats
150-180 seats
70 seats
Total
18
23
28
32
38
50
54
56
59
64
14
14
14
14
14
82
91
98
105
116
....................................
....................................
....................................
....................................
....................................
2015
2016
2017
2018
11,663
12,564
13,251
13,956
Pilots demands
Demand for pilots is determined by the flying hours of each aircraft type. To enhance the
performance of both the holding company and our subsidiaries, pilots are expected to work for
Vietnam Airlines as well as to support Cambodia Angkor Air and Jetstar Pacific Airlines.
Aircraft type
2014
2015
2016
2017
2018
250-280 seats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vietnamese pilot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150-180 seats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vietnamese pilot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70 seats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vietnamese pilot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vietnamese pilots . . . . . . . . . . . . . . . . . . . . . . . . . . . .
252
242
394
215
88
78
734
535
274
264
458
232
92
77
824
573
334
324
492
255
94
78
920
657
412
402
520
245
94
73
1.026
720
480
470
554
255
94
71
1.128
796
Technicians demands
We projected that the number of engineers and technicians required to meet the fleet maintenance
demand of both Vietnam Airlines and other carriers will reach approximately 2,900 by 2018.
Therefore, we need an additional 200 technical workers each year.
For the fiscal year ended December 31,
2014
2015
2016
2017
2018
................................
................................
................................
................................
................................
Total
Supervisor
Maintenance
technician
Support staff
3,479
3,805
4,271
4,669
4,815
795
869
976
1,067
1,100
2,141
2,342
2,628
2,873
2,963
543
594
667
729
752
Investment plan
The following investment plan is designed based onour strategic plan to expand operational
capacity.
Goals and objectives
In light of the strategic business plan, our investment aims at developping the fleet in terms of
quantity and quality while maintaining our competitive strengths and flight frequency to meet the
markets demand.
12
Infrastructure constructions
- Education and training infrastructure
- Offices in Gia Lam, Noi Bai, etc.
Facilities: including training facilities and supporting equipments for operation
IT: relying on outsourcing and only investing in a few specialized IT projects for
management and operations.
Divestment
Implementing Decision No.172/QD-TTg dated January 16, 2013 of the Prime Minister on
approving our restructuring project for the period 2012-2015, at the end of September, 2014, we have
completely divested from Techcombank, Bao Minh Insurance Corporation and Hoa Binh Securities
Company and shares of France Telecom. In total, we have divested VND 207.81 billion, roughly 70%
of the divestiture portfolio (base on the initial investment), and received VND 469.91 billion.
Capital expenditure for the period 2014 2018
The total capital expenditure from 2014 to 2018 is VND 69,994 billion.
Of which:
Aircraft:
Construction:
Facilities:
Capital investment:
(Note: the new capital investment is VND 2,073.4 billion while the amount to be divested is
VND 80.6 billion).
Aircraft expansion
Given the approval of the Prime Minister on our fleet expansion plan, we will carry on
implementing the 04 aircraft invesment projects from 2014 to 2018, i.e. Project 10 A321 aircraft in
2007, project 10 A321 aircraft in 2009, project 10 A350 aircraft and project 08 B787-9 aircraft, with
total capital expenditure of VND 63,297 billiosn. By the end of 2018, we will complete the first two
projects and the project converting 08 B787-8 aircraft to B787-9.
The total number of aircraft to be delivered in 2014-2018 is 23 aircraft. The following table sets
forth a summary of aircraft delivery schedule for the period 2014-2018, including 7 A321, 8 B787-9
and 8 A350.
A321 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B787-9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A350 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facilities investment
2014
2015
13
2016
2017
3
2
1
4
2018
Total
7
8
8
Total expenditure on facilities during 2014-2018 is expected to be VND 2,348 billion, including
training facilities in 2015-2016 for the coaching of pilots and flight attendants operating new aircraft
like A350 and B787-9 (such as door training project, Mockup project, and IFE - In-flight
entertainment equiment projects for A350 and B787-9); ULD (Unit Loading Devices) project in
2015 and 2016; ULD projects in 2017-2018; HR management system project and ground services
projects, etc. Facitilities and IT investment projects are carried out on an annual basis for fleet
operations, training, improving efficiency, service quality and sales skills.
13
70
Construction plan
The total Capital expenditure for construction in 2014-2018 is forecasted to be VND 2,356
billion. We seek to complete primarily the 7 ongoing critical projects by 2015. In particular, the
complex of offices and professional aviation training at 200 Nguyen Son - Long Bien Hanoi (phase
2) is projected to complete by 2017 due to various changes in the policy and scale.
New projects for the period 2014-2018 will focus on planning and investing in infrastructures
such as aircraft apron, hangar with ancillary workshops and facilities for aircraft repair at the airports
such as Noi Bai, Da Nang, Long Thanh (e.g. Hangar 3.4; Workshop at Tan Son Nhat, Noi Bai; Apron
plane at Noi Bai ...) and projects to improve working conditions and operations (e.g. Airlines city in
Gia Lam area, office area at Noi Bai, and our office at 27B Dien Bien Phu Street - Da Nang).
Capital investment
We expect the additional amount of new capital investment for the period 2014 to 2018 to be
VND 2,073 billion, including capital contribution to the establishment of new companies supporting
to air transport such as: the Company Call Center, the Flight Simulation Company, the Aircraft Spare
Parts and Repair Company, the Backup Engine Maintenance Service Company and Aircraft Interior
Facilities Maintenance Company; and an additional amount of VND 1,871 billion to our subsidiaries.
Currently, we have carried out the divestment procedures to divest 03 of our investments, namely
Air Services Supply JSC (AIRSERCO), Aviation Logistic Services (ALS) and France Telecom.
The remaining 04 investments as noted in the restructuring scheme include Aviation Plastics JSC
(APLACO), Aviation Investment JSC, Saigon Post and Telecommunications JSC and Aviation Hotel
JSC. We have established consulting groups to analyze divesting options in these companies.
In addition, during the period from 2014 to 2016, we will continue to divest from 5 companies:
71
Regarding fixed assets, according to this 5-year plan, our total asset will be VND 70,962 billion
as of 31 December 2018, of which aircraft and engines account for VND 62,268 billiosn, equivalent
to 87.75% total fixed assets v 57.8% total assets. During 2014-2018, we will invest VND 60,964
billion in fixed assets, of which the amount for airliners and engines acquisition including 5 A321, 8
B787-9 and 5A350 is 57,392 billion, equivalent to 94%. Furthermore, we plan to implement sales
and leased back project with 01 backup engine for A321, 2 A321 aircraft v 3 A350 aircraft. Those
proportions reflect our strategy to enhance operational capacity of the core business by spending most
of the capital on development and improving fleet age.
2014
2015
2016
2017
2018
Asset
Current Assets . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . .
Non-current Assets . . . . . . . . . . . . . . . . . .
Fixed Assets . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . .
13,443
3,620
52,345
37,717
65,788
16,077
5,176
66,622
51,276
82,726
17,156
5,338
77,936
61,052
95,118
18,234
8,986
83,760
68,277
102,023
24,382
13,817
83,376
70,962
107,788
Asset structure
Current Assets . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . .
Non-current Assets . . . . . . . . . . . . . . . . . .
Fixed Assets . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . .
20.4%
5.5%
79.6%
57.3%
100%
19.4%
6.3%
80.6%
62.0%
100%
18.0%
5.6%
82.0%
64.2%
100%
17.9%
8.8%
82.1%
66.9%
100%
22.6%
12.8%
77.4%
65.9%
100%
Capital Structure
Equity
Our total equity at the time of valuation (March 31, 2013) is 10,576 billion VND. During 2014
2018 this is expected to increase by 16,000 billion VND to 26,576 by the end of fiscal year 2018, a
2.65 times increment. We intend to raise equity capital from the following sources:
premium from a 25% equity sales in our IPO in fiscal year 2014 3,500 billion VND
additional equity issuance for existing shareholders in fiscal year 2015 4,000 billion
VND, and
additional equity issuance, reducing Government ownership to 65% in fiscal year 2006 4,500 billion VND
We also plan to retain some of our annual earnings in our equity capital to maintain a wellbalanced financial position.
The debt/equity ratio (not including ticket sales payables) remains at a relatively high level
during 2014-2016 for our strategy to maintain high growth during this period, when fleet investment
exceeds our capability to retain and raise the equity. However, we expect to reduce this ratio to a level
of 2.7 to 3 times in 2017-2018 by a number of measures such as issuing additional shares in 2014 and
2016, improving cash flow and liquidity management, allowing multiple capital raising options.
Debt
Long-term debt: in order to execute the fleets expansion and construction plans as scheduled,
the total medium-long term debt capital needed during 2014-2018 is VND 61,218 billion (equivalent
to USD 2,708 billion), 96% of which is for fleets expansion of 5 A321, 10 A350 v 8 B787 aircraft,
worth USD 2,597 billion. Meanwhile, we desire to pay the principals of other long-term debt with an
estimated amount of VND 44,958 billion, equivalent to USD 1,978 million. Therefore, total
outstanding long-term debt as of 31 December 2018 will be approximately VND 58,130 billion,
increasing by VND 20,281 billion compared with that in 2013 (VND 37,818 billion), and the mature
amount is projected to be VND 6,629 billion.
72
Short-term debt: In addition to long-term debt, we will continue to use short-term debt to
rebalance our cash flows in USD, to meet payment requirements at peak periods and/or difficult
periods in the foreign exchange market during 2014-2018. The short-term debt will be used flexibly
based onenhanced cash flow management and forecast for a reasonable cost of capital.
Capital
Current liabilities . . . . . . . . . . . . . .
Bank loans and current portion of
long-term debt . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . .
Long-term debt . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . .
Total Capital . . . . . . . . . . . . . . . . .
Capital structure
Current liabilities . . . . . . . . . . . . . .
Bank loans and current portion of
long-term debt . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . .
Long-term debt . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . .
Total Capital . . . . . . . . . . . . . . . . .
2014
2015
2016
2017
2018
21,240
24,688
25,527
27,142
30,812
9,953
30,154
30,037
14,394
65,788
11,625
42,672
42,539
15,366
82,726
9,437
47,660
47,500
21,932
95,119
7,875
50,443
50,256
24,437
102,022
8,276
50,399
50,184
26,576
107,787
32.3%
29.8%
26.8%
26.6%
28.6%
15.1%
45.8%
46%
21.9%
100%
14.1%
51.6%
51%
18.6%
100%
9.9%
50.1%
50%
23.1%
100%
7.7%
49.5%
49%
23.9%
100%
7.7%
46.8%
47%
24.6%
100%
Execution of the strategic business plan for the period 2014 2018
Financial restructuring
Enhance cash flow management, including cash flow forecast (particularly ticket sales cash
flow), periodic budget planning and control (monthly, quarterly), employing flexible use of
short-term line of credit to maintain adequate liquidity (especially for USD-denominated
transactions);
Expand the traditional capital raising methods such as corporate bonds and/or through
government bond issuance (domestically and internationally), commercial bank loans, loan
guarantee programs, aircraft sale and lease back, and other source of funds;
Supervise strategy execution with regards to effectiveness, efficiency and cost saving
schemes;
Intensify the use of legal derivative products to hedge the fluctuation in fuel price and
exchange rate, to proactively manage our expenses.
Adopt a flexible investment and construction policy to maintain a healthy capital structure
and avoid unexpected expenses.
Human resources
Restructuring policy
Our departments are undergoing a consolidation process for administrative efficiency by
digitalizing office tasks and reorganizing the air transport training system to one central institution. At
the same time, we will enhance the operations of services training centers such as Noi Bai
International Airport ground service (NIAGS, TIAGS) and establish one for commerce training.
73
Recruitment policy
We base our title system and job description on the recruitment priority list as follows: pilot
flight-attendant commercial executive flight coordinator IT technician. A wide range of
recruitment channels are exploited, with a focus on online recruitment via our official web page.
Outsourcing policy
We will persist to rely on outsourcing for unskilled labor who are not on the air transport chain
like security, janitor, airplane cleaner, cargo handler, usher; or seasonal workers such as boarding
welcome staff; or call center staff (24h/24h) to simplify the system and remuneration policy.
We are designing an efficient recruitment plan to take advantage of seasonal characteristics of the
industry, matching the proportion of seasonal workers (such as flight-attendant and customer service)
with the business cycle.
Training policy
We aim to complete training courses materials and to establish a strong team of concurrent
instructors with high expertise and experiences. Additionally, we will focus on fostering online
programs to reach a wider audience, reducing costs and training time. Periodic training sessions are
designed to suit specific requirements of each job.
Career development policy
We highly focus on offering career advancement opportunities to help boost employees
performance. The career development plan comprises of (i) detecting occupancies; (ii) designing a
career pathway for employees; and (iii) individual employees responsibility in planning, managing
and executing their own career plan.
Partnership policy
In the upcoming years, we will employ a more proactive approach to recruitment by working
closely with certain universities such as Hanoi University of Science and Technology, Foreign Trade
University and National Economics University for high-quality human resources. Besides, we plan to
send employees to international air transport training institution overseas like Boeing and Airbus.
Moreover, we expect to design a required skills set, offering extra training sessions, encouraging
employees to pursue higher education and supporting the expenses for certain kinds of education.
Hence, we confidently believe our productivity will be upgraded to a level equivalent to that of British
Airways and American Airlines by 2018.
Services quality enhancement
We will construct a synchronized plan for both on-ground and in-flight services for individual
routes, including ground services, aircraft commercial configuration, flight schedules, in-flight
services, human resource and equipment preparation for a flight.
We plan to upgrade the quality of front line staff serving in the airport and in flights, particularly
staff serving business class. Flight-attendants will be assigned to specialize in one route or a group of
route, and receive training on service skills, social knowledge, and foreign languages.
Besides, we will ensure that aircraft equipment is adequate for servicing and allow outsourcing in
the beginning to learn their techniques. In addition, we will renovate our procurement procedures to
reduce the time required to execute new services.
We will supervise closely and evaluate thoroughly our procedures and policies , as well as a
system to execute and update policies in a timely manner to enhance service quality and conformity of
the entire network.
74
Invest in modern and efficient fleet not only to operate in a wider route network at higher
frequency but also to enhance our service quality at direct service points like ticket sales and
check-in counters, in-flight services, particularly targeting the new business class.
75
ATR72 and B777 fleets will control their own inventory level and execute sales, leasing and
exchanging supplies contract to meet maintenance and operating schedule.
A330 fleet will supply spare parts for the maintenance cost per hour program according to
airplanes flying hours via contracts signed with Evergreen Aviation Technologies
Corporation EGAT, which is valid until the lease term for A330 ends.
A321 fleet will manage their own operations like the ATR72 v B777 fleets. In the future,
this team is expected to supply spare parts for the maintenance cost per hour program.
A350 and B787 fleets are expected to provide supplies for the maintenance cost per hour
program.
Information Technology
Our plan to upgrade the IT system includes:
Offering customers convenient and modern services with up-to-date innovation and
techonology compared to other ASEAN countries;
Infrastructure investment will meet the requirement of innovative applications and will be
executed in conformity among various departments.
Cost saving
We seek detailed analysis of our input costs, consultants advices, other airlines experiences to
construct our own costs restructuring schedule. In the upcoming period, we will enhance the existing
measures and examine concurrently new solutions as follows:
Saving fuel costs (accounted for more than 35% of our total expenses) is a core measure in
our cost restructuring program, which has been implemented since 2008, including cutting
down on fuel consumption and unnecessary load in a flight, strictly imposing overweight
baggage policy, adopting technical innovations to reduce fuel consumption rate and onground fuel consumption, etc.
Price management measures have been executed, such as hedging fuel prices; tankering, i.e.
efficient fuel refill between departure and arrival; working with the authorities on tariffs.
77
Reorganizing the procedures applied for Services & Marketing units in order to cut costs
and enhance productivity
Maintenance cost control. Reducing maintenance turnover to decrease storage expenses and
lease fees for tools and equipments; establishing entities to manage spare parts, facilitating our selfsupply and reducing fiduciary fees for imports and exports; upgrading the capacity for VAECO;
selecting long-term outsourcing service providers for favorable prices; making the best use of
commercial terms from manufacturers and service providers.
Reducing food and beverage costs. Optimizing in-flight catering, cutting down on meals and
drinks in short-term flights periodically; optimizing input cost of a meal: portion estimation, tools, etc.
and constructing bonded beverage warehouse.
Reducing selling expenses. Promoting direct sales (website, call center, and our own ticket
agencies), and controlling expenses of the indirect channels (agencies, GDS).
Reducing airport fees. Managing an adequate number of counters and lounges at the airports,
working with the authorities on service fees and discounts.
Reducing administration expenses. Adopting an economic-technical quota system for the entire
corporation and cost management (KPIs) for each group of functional departments.
78
The airline industry is highly sensitive to local, regional and international economic conditions.
Our business, financial condition and results of operations are subject to changing economic
conditions and other factors beyond our control, including:
Higher levels of unemployment and lower GDP, leading to increased preference for lowfare means of transportation or low cost carriers (LCCs)
Low average income negatively impacts consumer spending on air travel, which causes a
material adverse effect on our business improvement plan
Unstable and increasing oil price makes it hard for us to accurately forecast future profits in
the business plans.
Legal risks
Legislation and regulations
Our operations are governed by legislation an regulations of the Socialist Republic of Vietnam,
including the Business law, the Tax policies, etc and the Securities law after successful IPO. Since
Vietnams legal system is incomplete, our businesses are subject to changes in legislation and
regulations, which may cause unfavorable results.
With respect to our international flights, we are also regulated by the laws and regulations of
other countries, as well as bilateral and multilateral treaties. In some cases, fares and flight schedules
have to be approved by the Governments concerned.
79
On environmental regulations, the European Union Emission Trading Scheme has been halted,
however it will increase our operating costs once applied.
Risk relating to the Courts verdict in Lawyer Liberatis case
The Court of First Instance of Rome (Italy) reviewed the lawsuit from 1994 to 2000 which was
filed by Mr. Maurizio Liberati (a lawyer in Italy) against Falcomar.Ltd (our ticket agent in Italy
stopped operation during the trial court) and Vietnam Airlines. The lawsuit related to the payment for
the work performed by Mr. Liberati for Falcomar.Ltd .
On 07 March 2000, The Court of First Instance of Rome issued Verdict No. 8395/2000 ruling
Vietnam Airlines liable to pay a compensation of 4,851,891,000 Lia (excluding tax) and related legal
fees to Mr Liberati.
Since 2004, Vietnam Airlines has cooperated with Vietnamese relevant authorities and lawyers
in France and Italy to follow the lawsuit. We sent appeal, requesting the cancellation of Verdict No.
8395/2000 in Italys competent courts and at the same time defended against Liberatis ongoing
lawsuits in Italy and France.
Total amount transferred and frozen was 5,468,287 EUR, equivalent to 155.9 billion VND
(recorded as long term deposit accounts in Vietnam Airlines balance sheet as of 31st December
2013). No provisions related to this litigation have been reflected in the consolidated financial
statements since The handling of the amount will be based on the relevant courts judgement. In the
audited financial statements, Deloitte Co., Ltd - Vietnam states its opinion on exceptions and possible
impact to our finance owing to the fact that the necessity for data adjustment cannot be determined.
Competition risk
Since the development of the airlines industry and the openning of the economy, the Government
of Vietnam and among others have been reducing the barriers which were meant to protect local and
state-owned businesses We face significant competition, both domestically and internationally, with
respect to routes, services and fares.
By allowing foreign investors to own up to 49% of an airlines equity and encouraging private
airlines establishment, the competition in the airline industry in Vietnam is highly increased. The
trend of airline alliance and the entrance of LCCs significantly add to the competitive pressure within
the low-budget market, reducing other airlines market shares, including ours.
In the ASEAN market, the competition highly comes from the Open skies agreement and the
joint ventures between regional LCCs and Vietnams domestic airlines.
In addition to our traditional gateway competition (from Thai Airways, Singapore Airlines,
Cathay Pacific), Middle Eastern airlines such as Emirates, Qatar, Ethiad accelerate route expansion to
Vietnam, accounting for a growing share of the distribution market traveling between Europe and
Vietnam. These airlines high frequency, better service quality and reasonable prices will increase the
competitive pressure on Vietnam Airlines in the European market.
Specific risks
Risks we are facing originating from the airline industrys specific charateristics, as follows:
Limiting state policies regarding obtaining requested slots at major domestic and
international airports
High-speed trains, meanwhile and other alternatives like video-conferencing further intensify
competition for our airlines.
80
Our results of operations are significantly impacted by changes in the availability and price of
aircraft fuel (jet kerosene) since fuel costs constitute a large percentage in our operating expense. We
have taken various hedging measures, including derivatives instruments to diversify the cost.
Risk related to the Offering
Since the Intial Public Offering is not underwritten, the total volume of shares registered might
be lower than the total volume of shares offered. Regarding to dealing with unsold shares, pursuant to
Article 40 of Decree 59/2011/N-CP dated 18th July 2011 on conversion of enterprises with 100%
state owned capital into shareholding companies, The Steering Committee for Equitization shall be
entitled to further offer publicly the number of unsold shares for sale to investors who participated in
the auction, by the method of direct agreement.Where [shares] are still not fully sold after being
offered publicly for sale by the method of [direct] agreement, the Steering Committee for Equitization
shall report the matter to the body authorized to make the decision on the equitization plan for
adjustment of the charter capital structure for conversion of the enterprise with 100% State owned
capital into a shareholding company before holding the initial general meeting of shareholders. The
Steering Committee for Equitization and the representative of the State owned capital portion in the
equitized company shall supplement the draft charter [and submit it] for passing by the initial general
meeting of shareholders with [an article giving] the right to further sell the State owned capital
portion in the shareholding company after its official operation pursuant to the Law on Enterprises,
in accordance with the amended equitization plan approved by the authorized body.
The risk related to the offering, if happens, will deviate our actual share capital structure from the
expected structure and reduce the share capital surplus, partly affecting our post - equitization
business plan.
Other risks
Risk related to the exception opinion in our Consolidated Financial Statement for the year
ended 2013 due to property loss caused by natural disasters at Lien Chieu Storage (Da Nang) and
relevant litigation
Vietnam Air Petrol Company Limited (VINAPCO) is a subsidiary where we invested 100% of
its share capital.
On 16 October 2008, Lien Chieu jet fuel storage in Da Nang City of Middle Region Air Petrol
Enterprises (VINAPCOs wholly-owned subsidiary) was eroded. VINAPCO submitted a petition
against Petroleum Insurance JSC PJICO (today known as Petrolimex Insurance Corporation
PJICO) to the Economy Court the Peoples Court of Hanoi, requesting PJICO to compensate for the
damages and remedial costs at the Lien Chieu storage.
After proceedings at relevant court levels, the case remains unsettled. The Court of Appeal The
Supreme People Court in Hanoi issued Notice No. 1513/TBTL-VA on acceptance for appellate
jurisdiction responding to PJICOs appeal against the 2nd Instance Judgement No. 05/2014/KDTMST. For the time being the Court is considering the lawsuit settlement in accordance with the law.
When the verdict is announced, VINAPCO will perform financially- related work that might affect
Vietnam Airlines state capital value and stock price.
Currently, VINAPCOs inventory loss due to the erosion at Lien Chieu Storage is recorded as
Other receivables, equivalent to 8.6 billion VND in the Balance Sheet as of 31 December 2013 and
no liabilities with respect to Military Petroleum Corporation have been reflected. The auditors
opinion by Deloitte Co., Ltd Vietnam stated that the necessity for adjustment in VINAPCOs
receivables and liabilities related to the litigation cannot be determined.
Risks related to transferring Aviation High Grade Plastic JSC (APLACO)s state capital at the
time of converting from a state-owned enterprise to a joint stockk company
We currently hold 30.41% of Aviation High Grade Plastic JSC (APLACO)s equity stake. The
enterprise was equitised in 2006.
81
In 2011, we transferred Aviation High Grade Plastic Companys assets, capital and employees to
Aviation High Grade Plastic Joint Stock Companys, with the state-owned capital equivalent to
17,787,801,179 VND as stated in the Record of Delivery. Representatives of the parties have signed
the Record of Delivery, however, former Director of Aviation High Grade Plastic, Chairman,
Managing Director and Chief Account of Aviation High Grade Plastic JSC agreed only with the value
of the state-owned capital as at the time of conversion from Aviation High Grade Plastic Company
into a joint stock company which was worth 14,977,114,195 VND ( 2,810,686,984 VND less than
the value of the state-owned capital as at the time of official conversion to a joint stock company of
Aviation High Grade Plastic Company which had been concluded by Vietnam Airlines under the
authorization of Ministry of Transportation).
Currently, as a representative of the state-owned capital at Aviation High Grade Plastic JSC, we
have been putting our best efforts in solving the issue mentioned above. Under the guidance of the
Ministry of Transportation, we have been further processing to complete the procedures of handing
over the state-owned capital to Aviation High Grade Plastic JSC as regulated and divesting from the
joint stock company under Decision No. 172/Q-TTg dated January 16, 2013 of the Prime Minister
on approval of Restructuring Vietnam Airlines for the period 2012 2015 project.
Solving the issue mentioned above may result in an adverse effect to our operation.
Other risks
Irregular risks such as earthquakes, typhoons, war and disease outbreaks will harm our business
and operation significantly. These risks are extraordinary and rarely happen but they cause severe
impacts, prevent operations and even the termination of the airlines.
The risks mentioned above do not fully list or explain all the risks related to the investments in
the Shares
82
49,009,008 shares
10,000 VND/share
Ordinary share
22,300 VND/share
One price level/investor
100 VND
Retail and institutional, foreign and domestic investors
as prescribed by the law
A minimum of 100 shares/investor, no maximum limit
Ho Chi Minh Security Exchange
Total years of Vietnamese employees in the Public sector corresponding to the number of
employees registered for the preferential rates: 113,206 years (including the shares
registered by additional 47 employees approved for preferential rates);
83
Total number of shares registered for preferential rates subject to years of working
experience in the Public sector by 9,757 employees: 11.320.600 shares, accounting for
0,803% our share capital.
(List of employees entitled for preferential shares by years of working experience in the Public
sector is attached to the approved Equitization Plan)
Purchase subject to future commitment with our company
Employees who are in our list of regular employees as at the time of announcement of the value
of the equitizing enterprise and commit to work for Vietnam Airlines for a period of at least 03 years
(from the date Vietnam Airlines is granted the Certificate of Business Registration) will be entitled for
additional preferential shares at the rate of 200 shares/01 committed year in Vietnam Airlines, not
exceeding 2,000 shares. Employees who are experts and highly qualified, working in subsidiaries will
be entitled for additional 500 shares/01 commited year, not exceeding 5,000 shares/employee. Price
offered for the mentioned cases is equal to the lowest successful auction price at Vietnam Airlines
public auction.
Our criteria to identify eligible experts and highly qualified employees is as follows:
Specialists and team leaders (or above) who are working in Vietnam Airlines departments
and subsidiaries
Total number of additional shares registered subject to future commitment with our company:
9,474,500 shares, accounting for 0.672% of our share capital. List of employees registering for
additional shares is attached to the approved Equitization Plan.
Offering to employees
Number of shares
(shares)
As a percentage of
total share Capital
11,320,600
113.2
0.803%
9,474,500
20,795,100
94.74
207.95
0.672%
1.475%
Trade Unions
Pursuant to Point c Section 2 Article 36 of Decree 59/2011/N-CP dated 18 July 2011 of the
Government,
The trade union at the enterprise undergoing equitization shall be permitted to use funds of
the trade union at the enterprise (as defined in article 16.2 of the Law on Trade Unions; but
not by raising or borrowing capital) to purchase shares but not in excess of three (3) per cent
of charter capital.
These shares shall be held by the trade union and shall not be transferable.
The selling price of shares to the trade union of the enterprise shall be equal to sixty (60) per
cent of the lowest successful auction price
As at the time of announcement of the value of the equitizing enterprise, our Trade Union
registered to purchase 705,092 shares, accounting for 0.05% of our share capital.
84
Strategic investors
Potential investor
Foreign Strategic Partners are foreign airlines and/or Foreign Financial Investors who satify our
approved criteria.
Pursuant to Decision No. 1611/Q-TTg dated 10 September 2014 and The approval of The
Parent company Vietnam Airlines equitization plan, the Prime Minister authorizes the Ministry of
Transportation to determine the criteria and select strategic investors, ensuring compliance with the
provisions in Decree 59/2011/N-CP dated 18 July 2011 of the Government on conversion of
enterprises with 100% state owned capital into shareholding companies and related regulations.
The offering to strategic investors will be governed by the Minister of Transportation. Criteria
for strategic investors stated in the approved Equitization plan is the most basic and general. We will
add and finalize the detailed criteria for the Ministers approval after market survey and information
disclosure. The criteria includes:
General criteria. Financial capacity satisfies our minimum requirement; no investment in any
other airlines in Vietnam except for our subsidiaries and associates; investment commitment with us
for a period of at last 05 years;
Specific criteria. (i) Foreign Strategic Investor: flight network, brand, products and services,
administration, airline technology, training, cooperation scope, etc. (ii) Foreign Financial Investor:
financial capacity, investment experience in airline industry, co-operation scope.
Offering Volume
Total volume offered to strategic investors is 282,036,800 shares, equivalent to 20% of our
initial share capital.
Offering timeline
Pursuant to Decision No.3584/Q-TTg dated 24 September 2014 of Minister of Transportation
on approving the selection process for strategic investors, Vietnam Airlines will deploy the offering in
accordance with the process advised by Morgan Stanley & Citigroup our Advisors. The details are
set out below:
Scope of work
Expected date
The Equitization plan approved
10/09/2014
Teaser and Non-Disclosure Agreement (NDA) sent to potential strategic investors.
30/09/2014
Received Letters of Interest (LOI) from investors
Send our Information Memorandum and Process Letter to potential strategic
investors after NDA and LOI.
27/10/2014
Request Indicative Proposals from potential investors (Round I)
Collect Indicative Proposals
17/11/2014
Develop and submit the detailed strategic investor selection criteria
24/11/2014
Select potential investors for Round II
08/12/2014
Open Data room system for Round II selected investors
08/12/2014
BODs presentation;
15/12/2014
Roadshow
Collect Final Binding Bids together with related contracts (reviewed by the strategic
investors SPA/TSA markup) after due diligence over Data room;
17/01/2015
Presentation by Vietnam Airlines BOD;
Fieldwork; etc.
Select the most potential strategic investor;
16/02/2015
Negotiation and signing the contract between the 02 parties
Disclose information; Transaction complete
09/03/2015
85
The above timeline is subject to the market conditions and the level of interest of potential
investors. Adjustments may be done if required.
We will assess and rank interested investors based on the Final Binding Bids received, bidding
prices and auction participants. The investors will be categorized in 02 groups as follows: (1) foreign
airlines and/or (2) foreign financial investors.
Our priority is group (1) Foreign Airlines. If the negotiations do not succeed, we will move on to
group (2) Foreign Financial Investors.
We will launch the offering to strategic investors in parallel with the domestic IPO. The selection
results will be continuously updated via our website and at roadshows (scheduled from 28 to 30
October 2014) until the auction.
Through bidding: subject to the Auctions Terms and Regulations issued by Ho Chi Minh
Stock Exchange.
Strategic investors: subject to the Offering Process advised by Morgan Stanly & Citigroup.
86
USE OF PROCEEDS
The proceeds to the Company arising from the equitization will be calculated based on the
following basis:
The successful lowest bidding price is equal to the initial bidding price, assuming that the
offering price is equal to the initial price proposed (22,300 VND/share)
14.101,84
10.576,38
7.754,50
362,75
151,47
211,28
9,43
6.289,42
1.092,90
3.525,46
3.525,46
57,02
1.043,00
3.129,02
Pursuant to Decision No. 1611/Q-TTg dated 10 September 2014 by the Prime Minister on
approving the Parent company Vietnam Airlines equitization plan, Ministry of Finance is assigned
to guide Vietnam Airlines JSC on the use of proceeds to increase state-owned capital at Vietnam
Airlines JSC once the share capital is raised. We will manage and use the proceeds from the
equitization as regulated.
87
LISTING
After the IPO, we will have to prepare our portfolio to complete the listing requirement
prescribed at HOSE or HNX. We expect a detailed plan and timeline to deploy the procedure.
We expect to list our shares at a domestic exchange right after we meet all the listing
requirements and receive the competent authoritys approval as prescribed.
88
89
2008
2009
2010
2011
2012
587,517
10,548
113
80
1,182
296
615,000
7,618
165
124
2,075
382
9.56%
38.18%
867.3
7.95%
43.19%
1,126.2
801,244
12,736
81
61
3,686
427
400
2.20%
18.97%
1,412.9
996,003
21,971
12
8
6,751
412
400
0.18%
2.91%
898.6
1,095,122
25,664
83
61
7,421
459
400
1.12%
18.08%
1,912.5
2013
26,311
91
67
8,372
523
400
1.09%
12.8%
2.162,6
Source: VINAPCO
14
Vinapco Chartered Capital has not been readjusted since its re-registration as a Sole Member Limited Liability Company in 2010 until
now, resulting in a Chartered Capital of 400 billion VND in 2012 and 2013. In 2008 and 2009, before the re-registration, the companys
Chartered Capital was not 400 billion VND.
90
Net sales
Profit before tax
Net profit
Total Assets
Total Equity
Share Capital
ROA
ROE
2009
689.34
18.34
13.75
930.11
733.39
420
1.6%
2.4%
2013
1,381.24
88.53
72.83
1,902.22
1,109.5
1,062.81
3.8%
6.6%
Source: VAECO
15
16
Aircraft maintenance certificate from The Civil Aviation Administration of Vietnam (CAAV)
Aircraft maintenance certificate of The Federal Aviation Administration (FAA)
91
2009
7,892,666
178,086
178,086
10,341,692
7,678,087
15,000,000
1.72%
2.32%
2010
30,504,743
309,852
309,852
19,134,933
15,474,404
15,000,000
1.61%
2.00%
2011
33,231,752
20,524
20,524
22,961,871
15,494,928
100,000,000
0.09%
0.13%
2012
40,140,634
419,886
419,886
66,789,920
54,914,814
100,000,000
0.63%
0.76%
2013
69,359,677
(6,713,363)
(6,713,363)
85,125,819
68,333,054
75,000,000
N/A
N/A
93
Flights
Block hours
Load factor
Transported passengers (Thousand)
Supplied seats (Thousand)
Transferred passengers (Million-km)
ASKs (m) (million-km)
Transported cargo (ton)
Net sales
Net operating profit
Costs for aircraft
Fuel-hedging
94
2013
12,511
22,222
90%
2,012
2,253
1,876
2,090
9,017
2,656
(293)
N/A
N/A
Net income
Total Assets
Total equity
Share Capital
Net sales
Profit before taxes
Net income
Total Assets
Total equity
Share Capital
ROA
ROE
2008
91.9
9.1
7.7
20.5
17.4
8.6
37.64%
44.23%
95
Net sales
Profit before taxes
Net income
Total Assets
Total Equity
Share Capital
ROA
ROE
Earnings per share (VND)
2008
126.13
2.74
2.39
112.51
30.72
26.53
2.12%
7.78%
901
2013
119.4
2.27
2.27
96.08
28.61
26.53
2.36%
7.93%
858
96
2008
3,002,78
3
19,983
11
165.88
23.38
21.04
94.18
76.10
50.00
22.34
27.65
4,209
5,181
9,734
10,303
8,291
31.11
39.81
72.04
84.57
70.00
2013
5.146.60
8
30.984
13
379.40
39.67
31.63
152.52
112.47
50.00
20.74
28.12
6,328
52.00
Source: NCS
97
2008
4,602,313
40,611
17,036,923
2013
6,456,437
25,674,523
4,748,077
5,100,671
5,202,661
5,800,924
5,538,375
5,820,772
3,520,381
9,389,513
8,022,715
4,062,000
37%
44%
3,759,974
10,157,847
8,391,644
4,062,000
37%
45%
3,877,740
10,469,983
8,402,575
4,062,000
37%
46%
4,339,199
11,049,031
8,779,385
4,062,000
39%
49%
4,155,875
10,946,687
8,624,075
4,062,000
38%
48%
4,318,458
9,729,215
7,110,199
4,062,000
44%
61%
2,074,853
2,310,914
2,384,205
2,670,093
2,560,011
6,456,437
Source: VACS
98
services, ground transportations, loading/unloading services for air or road transport and other
services for sea/air/road cargo operation related activites
Currently, NCTS is an outstanding company whose major field is air cargo handling service
provison at Noi Bai International Airport. In 2012, the Company covered 94% of market share (to
specify, 98% of international cargo market and 92% of domestic cargo market). NCTSs clients
consisted of 28 carriers, more than 100 forwarding companies and million of individual clients each
year. NCTSs development orientation is to become a well-recognized and professional Cargo
Services Company in Vietnam Northern region. Despite the engagement against many difficulties in
exploitation ground, in 2012, NCTS still maintained and enhanced quality services and other utilities
for clients as well as maintained marketing policies, competitive advantages and its market position.
The Company imposed a lot of cost saving methods, expanding and diversifying value added
service strategies to increase revenue, so operating indicators are high: outputs attained 239,134 tons,
equal to 104% of targeted figure; revenue was 426 billion VND and Net income which hit 175.8
billion VND was equivalent to 41% of Net sales. During the period 2008 2012, revenue growth
averaged 24.5% per year, total assets growth averaged 20% per year and ROA, ROE were at high
level of over 55%.
In 2013, the Company achieved impressive business results because outputs, revenue
significantly increased by 27%, 31%, respectively and Net income increased by 41% to 247.5 billion
VND. The reason was in spite of depressed economy, the freight volume through Noi Bai Airport
Gate grew 24%. This sharp increase mainly stemmed from Sam Sung Vietnams import and export
demands.
Major indicators growth rate of the Company remains over 10% per year.
The table below sets forth the serving volume and main operating indicators for years ended
December 31 in the period 2008 2013.
2008
142,672
181.53
119.63
107.66
158.79
137.56
95.85
67.80%
78%
14,677
93%
49.14
99
2008
Outputs (ton)
194,055.28
Net sales
26,643,176
Profit before taxes
18,439,073
Net income
13,613,849
Total Assets
23,044,232
Total Equity
18,575,083
Share Capital
4,500,000
ROA
59%
ROE
73%
Contribution to VNA 7,289,452
17
201317
193,177.56
440,652
176,600
131,826
389,505
225,143
93,726
34%
59%
73,857
2013, TCS has changed accounting currency from USD to VND. Monetary indicators unit in 2013 is million
VND
100
Net sales
Profit before taxes
LNST
Net income
Total Assets
Total Equity
Share Capital
ROA
ROE
Earnings per share
(VND)
2008
522.86
0.14
2013
25.41
(0.82)
0.14
(10.06)
5.29
(11.28)
(11.87)
0.44
130.14
28.56
28
0.11%
0.49%
110.30
18.43
28
(9.12)%
(54.59)%
64.83
23.69
28
8.16%
22.33%
63.66
12.17
28
(17.72)%
(92.68)%
44.73
0.61
28
(26.54)%
(1.945.9)%
24.18
1.05
28
1.8%
41.9%
(3,594)
1,892
(4,031)
(4,242)
764
Source: AIRSERCO
101
Net sales
Profit before taxes
Net profit
Total Assets
Total Equity
Share Capital
ROA
ROE
Earnings per share (VND)
Cash dividend
2013
129,378
5,924
4,436
181,497
64,566
58,032
2.44%
6.87%
764
6.80%
Source: AITS
102
Net sale
Profit before taxes
Net income
Total Assets
Total Equity
Share Capital
ROA
ROE
2008
1.79
0.91
0.7
33.07
32.83
32.12
2.12%
2.13%
2013
77.48
7.46
5.54
108.31
72.10
66
5.11%
7.68%
Source: VFT
103
Tan Son Nhat Cargo Services and Forwarding Co. Ltd (TECS)
Tan Son Nhat Cargo Services and Forwarding Co., Ltd (TECS), set up in 2006, was our joint
venture with A41 Aircraft Repairing Company, Ltd (an entity under the Vietnam Peoples Air-force
and Air-defense); headquarters in Tan Binh District, Ho Chi Minh city. TECSs Share Capital is 51.43
billion VND, in which we contribute 51% in cash and A41 Aircraft Repairing Company, Ltd
contributes 49% in the form of land use right.
TECSs main products and services are: Forwarding services, cargo operation by automobiles,
airport operation services, air transportation assistance services, office and warehouse leasing, logistic
services, cargo handling services, customs declaration brokerage, ground-commerce services, terminal
and warehouse operation services, airport ground services, express services, postal service agents.
TECSs goal is to build a modern and well-equiped Cargo Express Handling Centre in Tan Son Nhat
Airport with capability of competing with airports in the same region; whereby TECS can offer
perfect and diversified cargo services, satisfying the growth of freight volume which is passed through
Tan Son Nhat Airport. The project was initiated in March 2008 and wrapped up in late 2009,
officially put into exploitation on March 21st, 2010.
Currently, TECS covers major proportion of air cargo express market for in Tan Son Nhat
International Airport. Its clients are well-known express enterprises in the world such as FedEx, DHL,
UPS,... The output and revenue scale has grown over the years. Since the beginning year of its
operation(2010), the return on sale (ROS) has been higher than 25% per year whereas average ROE
and ROA from 2010 to 2013 were 30% and 11.7% respectively. The Companys business
performance is relatively stable with express services accounting for 6% market share through
subcontracts with TCS. Since August, 2012, Tan Son Nhat International Airport Customs office has
stopped exported goods monitoring department in TECS so TECS lost an important revenue source
from the provision of export services. However, TECS still proves its positive business performance.
The following table indicates output volume by category and main operating data of TECS in the
period 2008 2013.
In billion VND, except indicated otherwise
Year ended December 31,
2008
2009
2010
2011
2012
2013
Outputs (ton)
1,093 1,123 15,981 28,681
23,335 17.504
Output of operated goods (ton)
- 14,207 27,117
22,036 15.536
Output of forwarded goods (ton)
1,093 1,123
1,774
1,564
1,299 1.968
Net sales
16.2 11.95
68.26 105.07
97.88 108.87
Profit before taxes
4.23
0.68
17.03
39.39
27.78
31.29
Net income
3.07
0.56
12.77
29.27
20.63
23.07
Total Assets
121.16 154.55 182.05 193.31
179.40 171.01
Total Equity
54.66 44.55
57.26
73.76
73.86
76.29
Share Capital
51.43 51.43
51.43
51.43
51.43
51.43
ROA
2.53% 0.36%
7.01% 15.14%
11.50% 13.50%
ROE
5.62% 1.26% 22.30% 39.68%
27.94% 30.24%
Source: TECS (Audited Financial Statements in the period 2008 2013))
104
Net Sales
Profit before taxes
Net income
Total Assets
Total Equity
Share Capital
ROA
ROE
Earnings per share
(VND)
Cash dividend
2008
440,18
45,31
45,31
166,43
100,15
49,50
27.22%
45.24%
2013
573,17
40,09
36,76
226,81
144,34
83,16
16.21%
25.47%
8.658
5.482
5.642
5.652
6.351
4.345
52.5%
15%
40%
46%
43%
36.5%
Source: NASCO
105
Net sales
Profit before taxes
Net income
Total Assets
Total Equity
Share Capital
ROA
ROE
Earnings per share (VND)
Cash dividend
106
Net sales
Profit before taxes
Net income
Total Assets
Total Equity
Charter Capital
ROA
ROE
Earnings per share (VND)
Cash dividend18
18
2008
81.56
2.85
2.39
37.58
21.42
17.00
6.36%
11.16%
1,457
10.13%
No
75.336,30
13.822,00
6.106,80
II
Cold drinks
and
equipment
depot
Southern
VNA
Operation
Centre
Offices for
VNA
Middle
Region
Branch and
DIAGS
Offices for
VNA
Southern
Region
Branch
Headquarter
offices
Warehouse
for Noi Bai
Cargo
Terminal
Services JSC;
Offices for
Aviation
Labor Supply
and ImportExport
Company
(ALSIMEXC
O)
53.107,50
226.566,03
28.492,50
5.125,50
Operation
1.300,00
Purpose
301.902,33
1.000,00
Payment after
equitization
2.728,70
Warehouse
for the Parent
Company
3.426,00
Kindergarten
2.771,10
108
No
Area
(m2)
Payment after
equitization
payment
Offices for
Aviation
Labor Supply
and ImportExport
Company
(ALSIMEXC
O)
Investing for
Infrastructur
e for the
Parent
Companys
production
Project
VASCOs
Northern
Region
Branch
VASCOs
Head Office
Returned to Ho Chi
Minh City Peoples
Committee as requested
in the residence planning
Returned to
Ho Chi Minh
City Peoples
Committee
Operation
office for
flight crew
919
Northern
Region
Operation
office for
flight crew
919
Southern
Region
Southern
Region
Operation
Office
2.560,00
Returned to Ho Chi
Minh City Peoples
Committee as requested
in the residence planning
Returned to
Ho Chi Minh
City Peoples
Committee
9.382,90
Operation
office for
2.156,40
10
11
1.911,80
5.798,00
262,20
12
13
14
15
Purpose
18.733,10
3.126,30
109
No
Area
(m2)
Payment after
equitization
Purpose
Northern
Region cabin
crew
16
17
18
Training
center for
pilots and
crew
members
Southern
Region cabin
crews offices
Training
center for
pilots and
crew
members
Tickets sales
office
Transaction
and ticket
sales office
73.826,20
9.099,80
19
20
302,00
309,30
21
22
23
24
604,00
Transaction
and ticket
sales office
808,40
Transaction
and ticket
sales office
Transaction
and ticket
sales office
842,00
331,50
Transaction
and ticket
sales office
25
5.314,00
Operation and
Production
26
27
28
29
241,90
Transaction
and ticket
sales office
764,63
Transaction
and ticket
sales office
487,00
Transaction
and ticket
sales office
449,50
Transaction
110
No
Area
(m2)
30
31
32
payment
Payment after
equitization
Purpose
and ticket
sales office
698,80
Transaction
and ticket
sales office
159,30
Transaction
and ticket
sales office
5.006,00
293.990,45
B1
251.428,75
135.992,00
Hotel joint
venture
24.190,00
10.000,60
Operation
4.500,00
Operation
23.972,90
Operation
969,30
Operation
310,00
Operation
21.354,4
Operation
9.181,80
Operation
15.643,10
Operation
10
25.869,90
Operation
II
Operation
Operation
115.436,75
Operation
3.852,90
43.686,70
50.873,00
111
No
Area
(m2)
Payment after
equitization
Purpose
Operation
787,1019
641,50
789,55
Land allocation
extension
Operation
Land allocation
extension
Operation
10
518,20
Operation
4.994,80
7.636,00
1.657,00
B2
42.561,70
420,00
11.426,50
2.939,50
1.482,00
7.267,70
19
Land allocation
extension
Operation
Operation
1.080,00
464,00
Site - clearance
procedures completed
for Noi Bai International
Airport project.
Land lots have been
approved by Prime
Minister in principle of
paid transfer to
VINAPCO pursuant to
Document No
10187/VPCP-MDN
dated December 9, 2013.
Currently, VINAPCO is
waiting for handover
procedures.
On 10 June 2014, The Steering Committee 09 of Ho Chi Minh City Department of Finance submitted
Document No.4986/STC-BC09-CS to Ho Chi Minh City People's Committee for approving VINAPCO to
continue using this land base under VINAPCO's plan corresponding to the city's planning.
112
Area
(m2)
No
2.910,00
750,00
10
2.480,00
11
3.030,30
12
1.944,00
13
3.025,00
14
1.904,00
15
750,00
16
688,70
395.573,50
176.080,30
1.1
2.1
2.2
2.3
Purpose
payment
Operation &
Production
Operation &
Production
Operation &
Production
78.754,10
Operation &
Production
22.697,20
Operation &
Production
84.380,3
1.2
Payment after
equitization
91.700
219.493,20
118.041,90
991.466,28
948.904,58
42.561,70
113
Contract/Product
Effective period
Description
Partner
Delta Airlines
DL
VN/CI Codeshare
and Seat-exchange
Agreement
Form: Seatexchange
China Airlines
CI
From 03/07/2010
until mutual
agreement for
termination
Air France AF
Contract/Product
VN/SNCF
Codeshare
Agreement
Effective period
Description
Partner
From September 1,
2012 to August 31,
2015
SNCF
Agent Contract
8020/AT/OCT06
Aviareps
Airlines
Management
GmbH
3331/GR/JAN98
Goldair Golemis
Air Service Ltd
8008/SE/DEC06
Kales Service
Group
9998/IL/MAR09
Maman
Aviation Ltd
8320/AE/JUN08
Sharaf Travel
LLC
9999/BE/JUN03
Kales Airlines
Services
9998/NL/NOV00
Kales Airlines
Services
8042//PL/SEP08
Airlinescity Sp.
z o.o.
5999/CH/SEP03
Airlines &
Tourism Center
GmbH
115
Contract/Product
Effective period
Description
Partner
8196/ES/APR06
Silon Aviacion
S.L
020/IN/SEP07
World connect
Private Ltd
9999/ID/SEP01
PT Deks
Aviation
Internusa
11/2014
A321-231
Airbus
Aircraft Purchase
Contract
(P.A12.2007)
Amendment 1-5
12/2015
A321-231
Airbus
P.A 12.2007)
Aircraft Purchase
Contract
Q4/2016
A350-900
Airbus
Aircraft leasing
contract
8-10/2015
A350-900
CIT
Aircraft leasing
contract
(L.A 6.2009)
6-9/2015
A350-900
ILFC
Aircraft Purchase
Contract (P.A
6.2005) and SA
1,2,3
5/2015
B787-9
Boeing
Engine Purchase
Contract
5/2015-Q4/2018
Genx engines
General Electric
(L.A 7.2009)
(P.A 10.2013)
116