such as tourism, plastic and food production. In particular, the asset depreciation fund is considered an important source of reinvestment to create internally accumulated capital, increasing production capacity in the condition that capital does not increase.
The company also needs to take full advantage of opportunities to mobilize capital for aircraft purchases through guarantees from import-export credit organizations of the aircraft manufacturing country with preferential conditions. In addition to mortgage and purchase loans, when necessary, the company must research and apply mortgage and purchase loans, research and apply new forms of capital financing to save costs and improve capital investment efficiency.
The company needs to carry out investment projects in groups and specialized investment sectors, creating opportunities for project-based investment capital calling, a popular form of investment in the international capital market.
In addition, the Company can mobilize capital through establishing joint ventures in the fields of engineering and service business with domestic and foreign partners, mobilize capital through commercial loan contracts linked to export credit loan contracts, make the most of ODA capital sources, support capital and cooperation from international organizations, aircraft and equipment suppliers.
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Another effective measure is that the airline can mobilize capital from the State budget by proposing that the State exempt VNA from corporate income tax for a number of years.
1.2. Complete maintenance system and technical assurance
The airline needs to strengthen its operational and technical management system according to VAR-OPS and JAR-145 regulations to ensure control of technical operations and aircraft maintenance processes in compliance with quality and safety requirements of relevant domestic and international aviation authorities. This is also a basic and important content to ensure that VNA becomes an airline operator.
The high reliability and safety, internationally recognized, create an important basis for future forms of cooperation and alliances in aircraft engineering and maintenance.
Regarding aircraft maintenance and repair facilities: The airline should establish an aircraft maintenance and repair company, establish a joint venture with foreign countries on aircraft and engine maintenance and repair to quickly combine technical expertise and technology transfer from large aviation industry corporations in the world, with the advantage of low cost and high quality of Vietnamese workers. On that basis, gradually provide diverse technical and maintenance services with competitive quality and price to serve VNA, at the same time, it is a premise for technical alliance cooperation in the region, expanding the supply of technical services to both partner airlines and other customers in the future. To implement this content, the airline must promote the search and negotiation with reputable partners in foreign aircraft maintenance technology to establish a technical joint venture company on the basis of A75, A76 aircraft repair and maintenance enterprises. The goal is: by 2010, to be able to repair and overhaul the fuselage and wings of VNA's main aircraft types, 70-80% of mechanical equipment, and 50-60% of electronic equipment.
2. Solutions for developing the airline's flight network
2.1. Perfecting the policy for developing the flight network
For the entire flight network: In order to create absolute control over domestic traffic flows, gain a high competitive advantage over international traffic flows to Vietnam as well as in the Indochina, Southeast Asia and West Pacific regions, the airline needs to gradually shift the structure of its entire flight network towards a hub-spoke model with high frequency advantages and two closed transit hubs, Hanoi-Ho Chi Minh City. From there, each
steps to increase the airline's market share in the region and build Vietnam Airlines into one of the important air transit hubs in Southeast Asia.
Regarding the North-South and international flight network in Southeast Asia and Northeast Asia: It can be affirmed that this will be the main profitable segment of the airline. In which, the short- and medium-haul regional flight network plays a key role, including 1-3 hour international flights from Vietnam to surrounding countries. This network takes direct flights and high frequency as its competitive strengths and main development direction.
For key transcontinental markets: VNA needs to develop cautiously and selectively based on its internal capacity as well as its competitive correlation. The airline needs to ensure an average scale of operations in terms of flight frequency and capacity to support the regional flight network first, and on the other hand, facilitate the long-term development of large traffic flows. At the same time, it needs to establish marketing and flight network alliances with global international aviation corporations to expand the airline's international operations on important transcontinental routes. This alliance is based on taking advantage of the large-scale advantages of foreign airlines and overcoming the limitations of the airline's flight network and operating range in particular and its current synchronized product system in general.
For the trans-Pacific route network to the northwest coast of the US: This is a large market with fierce competition and many risks. Therefore, the airline should only participate when it has really ensured a relatively large and effective scale of operation, resources, especially technical and commercial staff, need to be carefully prepared. At the same time, there must be a management system with sufficient capacity and efficiency in the market mechanism.
2.2. Planning to open new routes
To expand its flight network, the airline must constantly search for and increase new routes. However, opening a new route depends on many factors such as the strength of other airlines that have participated in exploiting that route, the policies of the local government, the customs of the airport, the maximum operating frequency of the route... Therefore, before opening a route, the airline needs to carefully study the immediate and long-term economic benefits that the airline can achieve when exploiting the route, the airline's potential compared to other airlines,... From there, propose appropriate negotiation policies with the local government, the airport management board, and with other airlines to share the route.
In addition, the Company's import and export cargo transportation is combined on passenger flights, so the Company also needs to study the travel needs of passengers on that route to have measures to combine cargo supply capacity and propose reasonable flight frequency, thereby achieving optimal benefits in both the cargo and passenger transportation markets.
2.3. Maintain and develop the flight routes that the airline is operating
For routes that are being operated, the Airline must have measures to strengthen the cooperative relationship with the airport management board and with airlines that are operating the route, thereby increasing the flight frequency on the routes being operated. Also based on the analysis of the potential and benefits of the Airline as well as other airlines, the Airline can negotiate to increase the frequency on one route and reduce the frequency on another route to share the route with other airlines on the basis of mutual benefit.
Airlines also need to have marketing measures on fares, ticket prices, transportation services, etc. to attract customers to avoid the situation where flights open but have no passengers or lose passengers to other airlines.
3. Solutions to enhance the Company's capital mobilization capacity
Over the years, the Company's capital has been steadily increasing thanks to self-supplemented capital from profitable business, commercial loans and loans from export organizations. In addition, another very important source of capital is joint ventures with domestic and foreign organizations. However, the Company's total capital is still not enough to meet the capital demand, so to properly solve the capital problem, it is necessary to have reasonable and effective measures.
3.1. Mobilizing capital from within Vietnam Airlines
Mobilizing capital from within the Company, mobilizing from internal member units is the most effective and long-term strategy in mobilizing capital for development investment. Self-investment in development is the premise for orientation aimed at internal potential. Mobilizing all resources from measures to increase production and business efficiency is the real source to mobilize to serve development investment. On the other hand, investment in development, expanding production, improving investment efficiency is the premise for rapidly increasing revenue, increasing capital accumulation from production and business activities.
Accumulating capital from basic depreciation is a reasonable measure to increase equipment innovation and maintain the aircraft fleet. Since 1996, VNA has stipulated that: Ground equipment depreciation fund and aircraft depreciation fund are only used for investment in aircraft. This is a correct solution that needs to be maintained. Encourage units in the airline to quickly depreciate fixed assets for reinvestment, increase the rate of profit after tax for in-depth investment, expand production, and innovate equipment to create products and services with high quality, high technology and good competitiveness.
Another effective form of capital mobilization is direct borrowing from employees within the Company. This is a form that many businesses have implemented quite successfully. For VNA, this is a very potential source of capital, if the Company has
The right direction will attract a large amount of idle money from employees. Vietnam Airlines is a large enterprise, with more than 13,000 employees with a relatively high average income. On the other hand, the company has great potential to create confidence in future development, so it is completely possible to tap this source of capital. Moreover, mobilizing capital directly from employees is also very meaningful, it is not only a source of capital mobilization for the company, it also creates conditions for employees to invest, and above all, it makes employees more attached and responsible for their business. However, there should also be a policy to ensure adequate benefits for employees in terms of interest rates, at least not lower than commercial bank interest rates.
3.2. Raising capital from outside the Company
Based on the business practice in the condition of severe capital shortage, Vietnam Airlines always focuses on exploiting capital sources from outside. However, mobilizing from outside means that the enterprise has to pay a cost for using that capital. Therefore, it is necessary to determine the accuracy and science of each capital mobilization project, only mobilizing when really necessary, avoiding the situation of widespread mobilization.
Some highly feasible capital mobilization solutions are envisaged as follows:
a) State budget capital
Besides the goal of business development, civil aviation is a special industry, a gateway to international exchange, affecting many other economic sectors in the country. Moreover, aviation belongs to the technical infrastructure of the economy, requiring large investment capital that the airline alone cannot undertake.
Therefore, it is urgent to have appropriate investment and attention from the State.
Vietnam Airlines, due to its low ownership ratio and high proportion of aircraft leasing costs, has low operating profits, while the current corporate income tax rate of 28% makes profits for reinvestment low. Because Vietnam Airlines is a state-owned enterprise, the State has the right to request a portion of the profits generated by the State's investment. However, under current conditions, VNA can mobilize capital from the State budget by proposing to the State to allow the airline to exempt from paying income tax for a number of years to invest in developing its aircraft fleet. In addition, it can propose to the State to support the consideration of providing additional capital to reduce the ratio of loans for purchasing aircraft from 85% to 70% to improve business efficiency. The above-mentioned retained corporate income tax and additional budget capital can be owned by the State in the capital of Vietnam Airlines or in the form of the State postponing budget payment and providing preferential loans within 20 years so that the airline can invest in modernizing its facilities, quickly shortening the technological gap, and improving its competitiveness.
b) Capital from issuing shares
Equitization is a solution that can solve the capital difficulties of the Vietnamese aviation industry, however, without preparation, it is difficult to implement effectively. However, in terms of long-term strategy, equitization is a necessary and effective solution to mobilize capital for development, not only for the aviation industry but also for all other economic and technical sectors.
In the current conditions of Vietnam, when the stock market has been formed and gradually developed stably, the national airline is completely capable of penetrating this direct financial market. Vietnam
Airlines should accelerate the equitization of its subsidiaries, first of all non-air transport units, in order to mobilize more capital sources, create an operating environment suitable for market mechanisms and improve the efficiency of management and production and business operations. Up to now, Vietnam Airlines has completed the equitization of 12 independent accounting subsidiaries. According to the Government's direction, VNA will develop a program to partially equitize the National Airline from 2008.
c) Capital from bond issuance
Currently, in Vietnam, the amount of idle money among the population is still quite large, so issuing bonds is necessary to mobilize this idle money source.
In essence, issuing bonds is also a form of direct capital mobilization from the population. With many advantages, bonds are considered an effective capital mobilization tool. If this form of mobilization is implemented well and there are more successes in production and business, in the future, the Company will be able to exploit this direction. Financial resources mobilized through bonds will be one of the Company's funding sources. Vietnam Airlines is a state-owned enterprise with a position and reputation in the national economy, so investors will feel more secure when buying the company's bonds. This will be the basis for long-term capital mobilization for the Company.
d) Loans from commercial banks and export credit organizations
Currently, domestic banks mainly lend short-term and medium-term loans at low interest rates. The Corporation is a large and reputable business unit, so borrowing capital is not difficult. However, this capital cannot be invested in the long term, so it is necessary to combine it with long-term loans from import-export credit organizations to be able to invest in purchasing aircraft and operating aircraft maintenance facilities and ground equipment facilities.
e) Funding