(Bloomberg) -- Vietnam’s Bamboo Airways JSC is rebuilding under its new chief executive officer, who is intent on proving the indebted six-year-old carrier has a future after shedding two-thirds of its fleet and 80% of its network.
“We need our passengers to believe in our future,” Luong Hoai Nam said in an interview with Bloomberg News. “We need to make our investors, shareholders and potential investors believe in our future. We definitely have to move fast.”
The airline, which is working to whittle down 11 trillion dong ($454 million) in debt and is in talks with a local bank on financing, posted a 17.6 trillion dong loss last year, largely due to provisions for bad debts. It’s a far cry from the grand vision of former Chairman Trinh Van Quyet, who is now in prison.
Quyet had plans for direct flights to the US and an initial public offering to give the airline a market capitalization of as much as $1 billion. Bamboo once operated 66 domestic routes and 15 international, but now it only flies a few international charters and 16 local routes, Nam said.
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“The impact of Covid left the airlines in Vietnam in a weaker financial situation,” said Brendan Sobie, Singapore-based founder of consultancy Sobie Aviation. “But the bigger picture is the Vietnam market experienced rapid growth on the back of extremely low fares. It’s not sustainable.”
The Communist government in Vietnam, where the average annual salary is about $4,000, sets a cap on economy-class airfares.
With flights dwindling and debt mounting, Bamboo ended contracts with its foreign pilots and will cut about 60% of its workforce costs by the end of March, Nam said in the interview Monday. The airline has reached an agreement to provide backpay to some foreign pilots who are still owed wages, he said.
Bamboo has returned 19 aircraft, including three Boeing Co. 787s, to leasing companies, leaving it with a fleet of 11 planes made by Airbus SE and Embraer SA. To improve efficiency, the airline intends to eventually use only Airbus aircraft and aims to get back up to a 30-strong fleet in three to four years, said 60-year-old Nam, who joined Bamboo in October having previously led Vietnam Airlines JSC’s budget carrier Pacific Airlines.
Quyet, the former chairman who owned a gold-plated Rolls-Royce, is in jail on charges of fraud not tied to the carrier. Police are seeking to prosecute him for allegedly manipulating stocks and obtaining assets by fraud. His representatives weren’t available for comment.
Read More: Vietnam Quickens Criminal Probes That Rattled the Economy
Earlier this month, the tax authority of central coastal province Binh Dinh, where Bamboo is based, threatened to freeze its bank accounts because it was 90 days late in paying taxes of about 103 billion dong. The airline is in talks to extend the payment deadline, Nam said.
Saigon Thuong Tin Commercial Joint-Stock Bank, known as Sacombank, is Bamboo’s main debt owner. The lender is looking to invest in Bamboo and help with its restructuring, according to Nam. The largest stake Sacombank can take is 11% — the legal maximum for a Vietnamese lender — and it would need central bank approval, Nam said, without giving a time frame.
Sacombank didn’t immediately respond to a request for comment.
After Sacombank’s investment, Bamboo will look for some financial assistance to get on a sound footing, such as a bank loan, bond issuance or other financial facilities, Nam said.
While the carrier’s 2024-2028 financial plan calls for tapping domestic investors, Bamboo is also receiving interest from overseas and will consider offering stakes. Vietnam allows foreign investors to hold as much as 34% of a local airline.
“We don’t have any plan to file for bankruptcy,” said Nam, adding that Bamboo’s planes will continue to include business class. “Our creditors – including banks and suppliers — want Bamboo Airways to stay in business.”
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