Recently, a leader from the Vietnam Civil Aviation Authority confirmed that Pacific Airlines will temporarily suspend its operations from March 18th, after returning all leased aircraft to its partner. The main reason is that the airline is restructuring its routes.
The representative also mentioned that Pacific Airlines will seek new partners to lease aircraft. Once the leasing is successful, the airline will resume its registered routes. “Currently, the airline still has several unused aircraft that will continue to be returned, after a thorough technical inspection according to the leasing contract,” the representative said.
Customers looking for flights can no longer find any schedules of Pacific Airlines. Returning all leased aircraft to the partner will eliminate some agreed-upon debts, helping to reduce the financial burden for both Pacific Airlines and Vietnam Airlines.
According to information from a Vietnam Airlines leader, it confirms that Pacific Airlines is restructuring its fleet to increase efficiency and optimize costs. During this period, Vietnam Airlines will continue to provide necessary support by offering leased wet aircraft (aircraft and crew) to support Pacific Airlines’ customers.
Continuous restructuring while Pacific Airlines is still heavily in debt
Pacific Airlines was established in 1991 and was the first low-cost airline in Vietnam. Currently, Vietnam Airlines owns over 99% of the shares of this airline. However, unlike another low-cost airline, VietJet, Pacific Airlines has continuously incurred losses since the early 2000s.
In April 2007, Pacific Airlines unexpectedly partnered with Qantas Airways. At that time, the Australian airline signed an investment agreement with SCIC to acquire a 30% stake in Pacific Airlines to become a strategic shareholder. Qantas aspired to have its own low-cost airline, Jetstar Airways, appear on the Asian map.
According to the initial agreement, Qantas would invest $50 million to own 18% of Pacific Airlines’ shares, and then invest more to own 30%. With this money, Pacific Airlines would be able to reduce losses. In return, it would change its brand to Jetstar Pacific Airlines.
Despite the significant investment, by the end of 2011, Jetstar Pacific only accounted for about 17% of the domestic aviation market share in Vietnam. Due to the consequences of consecutive years of losses, the company had to restructure its ownership and review its operations completely.
Also in 2011, Vietnam Airlines took over the state capital representation rights of Jetstar Pacific from SCIC with nearly 69% of the shares and became the mother company of this airline once again. With its experience, Vietnam Airlines was entrusted with the task of bringing Jetstar Pacific back to recovery and developing its fleet.
Image of Pacific Airlines when it was still known as Jetstar Pacific.
After Vietnam Airlines’ restructuring process, Jetstar Pacific gradually reduced losses and started making a profit for two consecutive years, 2018 and 2019. However, before reaping the benefits, Covid-19 arrived and heavily impacted the aviation industry, causing most fleets to halt operations. Pacific Airlines then continued its losing streak.
In October 2020, Qantas Group went through the procedures to withdraw from Pacific Airlines and transferred 30% of its shares to Vietnam Airlines as a gift.
According to Vietnam Airlines’ annual report, in 2022, Pacific Airlines recorded a total revenue of nearly VND 3,487 billion, pre-tax losses of VND 2,096 billion, reducing losses by VND 212 billion compared to 2021.
Based on our data from 2009 to 2022, Pacific Airlines was only profitable for three years while in the remaining 11 years, it incurred losses. With three consecutive losses of over VND 2,000 billion per year after the Covid period, the estimated accumulated losses of Pacific Airlines by the end of 2022 have exceeded VND 10,700 billion, with negative equity of VND 6,700 billion.
Facing the extremely challenging situation of Pacific Airlines, Vietnam Airlines stated that it would continue to implement resource collaboration solutions, negotiate with suppliers for payment extensions/deferrals, and support by providing discounted prices to help the airline overcome the crisis.
Due to ineffective business operations, starting from the beginning of 2022, Vietnam Airlines has widely announced its search for investors interested in the restructuring process of Pacific Airlines’ shareholder system. However, the investor selection process has encountered many difficulties regarding mechanisms and policies according to the current regulations for state-owned enterprises. Vietnam Airlines is continuing to report to authorities at all levels for resolution.
