Vietnam Airlines (VN, Hanoi) is on the verge of bankruptcy, the country’s Ministry of Planning and Investment has warned, as losses and debts continue to accumulate while air travel demand fails to rebound.

Despite government approval of a VND12 trillion dong (USD519 million) rescue plan aimed at returning the cash-strapped flag carrier to profitability, it is estimated to have sustained a loss of VND10 trillion (USD435 million) in the first half of 2021, the ministry said in a draft report on business development in the country during 2020 and the first five months of 2021, released on June 14. Overdue debts have reached VND6.24 trillion (USD272 million).

Vietnam Airlines, which is 86% government-owned and 8.77% held by Japan’s ANA Holdings, is facing the threat of lawsuits because of its debts. Banks are no longer extending credit to the company, the report said, describing the company’s situation as “extremely dire”.

As of the end of March 31, 2021, its total liabilities amounted to VND59.55 trillion (USD2.6 billion), accounting for 98% of its total assets. It has nearly run out of cash with a balance of cash, cash equivalents, and short-term deposits of less than VND2.1 trillion (USD91 million).

Vietnamese airlines’ revenues were down 61% in 2020 on the previous year’s levels, and the situation has worsened in the first half of 2021 as the country endures a third wave of Covid-19, forcing revenues down 80% compared to the same period in 2020.

Vietnam Airlines is preparing to auction off eleven of its A321s to ease its losses, local media reported. According to the ch-aviation fleets advanced module, it currently operates forty-nine A321-200s and twenty A321-200Ns, along with two A320-200Ns, fourteen A350-900s, eleven B787-9s, and four B787-10s, plus seven ATR72-500s wet-leased in from VASCO - Vietnam Air Services (0V, Ho Chi Minh City).

Of these 107 aircraft, 41 are currently active. However, the Vietnam News Agency reported on June 16 that only nine are in regular service, with the remainder mostly sitting idle at Hanoi and Ho Chi Minh City. Hanoi Airport has asked Vietnam’s civil aviation authority for permission to close a taxiway to act as a parking apron, the news agency added.

Other local carriers like Bamboo Airways (QH, Hanoi) and VietJetAir (VJ, Hanoi) are also suffering, with VietJetAir, for instance, needing VND10 trillion (USD435 million) to continue operations, according to the ministry.

Vietnam Airlines did not immediately respond to ch-aviation’s request for comment.