Following a period of many changes, Bamboo Airways has found a direction in which to be "reborn" after Mr. Luong Hoai Nam was appointed to the position of General Director of Bamboo Airways, effective from October 23, 2023. Nhan Dan Newspaper reporters had a conversation with him after more than 2 weeks in the hot seat.
THE MOST DETERMINANT AND EXTENSIVE RESTRUCTURING PROJECT IN THE HISTORY OF VIETNAM'S AVIATION INDUSTRY
Q: At your inaugural address, you commented, “Bamboo Airways’ restructuring is the most comprehensive, strategic, and far-reaching restructuring project in the history of Vietnam's aviation industry.” Can you explain this statement more clearly?
A: First of all, I would like to confirm that we have no intention or plan to bankrupt Bamboo Airways as rumoured. There has been an unfortunate misunderstanding due to the company’s error in reporting the situation to the government. I would like to clear up this misunderstanding. No one will benefit if Bamboo Airways goes bankrupt.
Vietnamese people and consumers do not benefit from losing an airline or flight option for their trips, whether it is for work or for personal travel. Especially as Bamboo Airways has won a lot of sympathy from passengers in recent years for its punctual flights, standard service attitude, and high service quality.
Bamboo Airways employees do not benefit from losing their jobs at a business they love and are very attached to. Shareholders of Bamboo Airways do not benefit due to loss of money invested in this airline.
Bamboo Airways CEO Luong Hoai Nam talks with a reporter from Nhan Dan Newspaper.
Bamboo Airways CEO Luong Hoai Nam talks with a reporter from Nhan Dan Newspaper.
If Bamboo Airways goes bankrupt, other Vietnamese airlines will have more difficulty in leasing, purchasing aircraft, and arranging international credit due to risk concerns. Vietnam's aviation industry will be affected if it loses the third largest airline in the country, which is also a major customer of many businesses providing services at airports, such as fuel, meals, catering, ground service, etc.
Service providers who are also creditors of Bamboo Airways do not want the airline to go bankrupt, because then they will lose all the money we owe them.
Therefore, we have been receiving sympathy and support, and they are committed to accompanying Bamboo Airways in the airline's comprehensive restructuring project, with the aim for collective consensus and support in the coming time.
Bamboo Airways’ restructuring is carried out on a fleet scale and route network dozens of times larger than previous aviation restructurings in Vietnam.
Going back to restructuring, Bamboo Airways is not the first case of restructuring of an airline in Vietnam.
In the early 2000s, Vietnam’s aviation sector witnessed several large restructuring efforts, however the fleets consisted of fewer than ten aircraft at that time.
Bamboo Airways’ restructuring plan is one with a fleet of 30 aircraft, more than 60 domestic routes and more than 15 international routes. This restructuring plan is much larger with a wider route network than previous restructuring plans by other airlines.
With regards to its extent, this is a “major surgery” to achieve a comprehensive change from the business model to the target market and the aircraft fleet. Bamboo Airways’ businesses will also be adjusted to suit the new business model and new target customers. Regarding management, Bamboo Airways will undergo a comprehensive change to become leaner and more efficient.
This is why I regard this as a comprehensive, strategic and most extensive restructuring plan in Vietnam’s aviation history.
Q: So the restructuring of the fleet and route network will play a primary role in Bamboo Airways’ current restructuring plan. Could you please give more detail about this plan?
A: To restructure Bamboo Airways, we have reduced the size of our fleet and route network in a pace that might shock many people.
First, we removed all wide-body Boeing 787 Dreamliners and international routes employing this type of aircraft. One week later, we suspended all regular international flights to Japan, the Republic of Korea, Singapore and Thailand. For now our network only includes domestic routes and some international charter flights.
It is not necessary for Bamboo Airways to operate international routes that are not making profits and are incurring huge losses. The company will concentrate on operating domestic routes efficiently to gradually reduce losses, reach a break-even point and then make a profit. Later we will expand our domestic network and resume international flights under a new business model and with much greater international competitiveness than previously.
Bamboo Airways will focus on developing a fleet of Airbus 320/321 aircraft only. Operating a single family of aircraft will help us cut operating costs by a significant amount compared to when operating three different types of aircraft. We will also work to minimise the types of engines, equipment and parts in the Airbus 320/321 fleet, which will result in further reductions in technical costs.
The fleet comprising only Airbus 320/321 aircraft allows Bamboo Airways to effectively serve the domestic market and all international markets within 5-6 hours of flight from Vietnam.
This market accounts for nearly half of the world's population. In the future, we will still be able to effectively exploit the markets of Europe, North America, Australia, and New Zealand through codeshares and alliances with other airlines without having to fly directly to those distant points.
Regarding business standpoint, Bamboo Airways will not operate any domestic or international routes that are not profitable. If they are not immediately profitable, they must at least have a chance to become profitable after a short time. Our recent suspension of domestic flights to Phu Quoc has been also consistent with this business viewpoint.
Returning fewer aircraft, halting the operation of international routes causing large losses, and restructuring the domestic flight network have greatly reduced the financial pressure on Bamboo Airways. The monthly payment for aircraft rental, aircraft maintenance, fuel, ground services, and meals is now many times smaller than before, helping us basically fulfil our commitment of not incurring new debt with existing aircraft lessors and service providers.
With a smaller scale of Bamboo Airways in terms of aircraft fleet and route network, the restructuring of the airline according to a new business model is easier and less costly. We can imagine that repairing a small house is always easier and less expensive than repairing a large building, so restructuring an airline is exactly the same. That is not to mention the fact that our aircraft rental debt has been exempted or reduced by nearly 2,000 billion VND through early negotiations to return some aircrafts.
In the current financial situation of Bamboo Airways, the reduction of such a large amount of debt is very meaningful, leading to the significant reduction of the amount of debt to be paid in the future. The partners, who are the remaining creditors of Bamboo Airways, will receive the repayment sooner than when we still had a debt of nearly 2,000 billion VND for this aircraft lease.
Our aircraft rental debt has been exempted or reduced by nearly 2,000 billion VND through early negotiations to return some aircrafts.
Q: Bamboo Airways has been receiving the consent of international partners through debt reduction and freezing. Could you please share more about this issue?
A: As I said above, Bamboo Airways' creditors do not want the airline to go bankrupt, because then they will lose all their debt. Therefore, we have been receiving individual sympathy and supports and are committed to accompanying Bamboo Airways in the airline's comprehensive restructuring project, towards a collective consensus and support in the near future.
Some aircraft lessors agreed to withdraw their aircrafts from Bamboo Airways before the lease termination deadline due to our changing business model. They also happily waived or reduced a large amount of aircraft rental debt for us, as noted above.
To date, I have not seen any signs of a lack of goodwill from creditors nor domestic and international business partners of Bamboo Airways, including partners who continue to cooperate and partners who are forced to temporarily suspend cooperation due to Bamboo Airways' restructuring.
It is important that Bamboo Airways has carried out the restructuring with the highest sense of responsibility, determination, and professionalism.
It is important that Bamboo Airways has carried out the restructuring with the highest sense of responsibility, determination, and professionalism.
It is important that Bamboo Airways has carried out the restructuring with the highest sense of responsibility, determination, and professionalism, thereby building trust among a large number of interested parties.
If labourers have confidence, they will work hard and creatively, with double or triple efficiency. If passengers have confidence, they can buy airline tickets with confidence. If agents have confidence, they will sell Bamboo Airways tickets to their customers. If service providers have confidence, they will continue to cooperate. If domestic and foreign investors have confidence, they will invest capital in Bamboo Airways to develop the airline. If the Government, ministries, branches, and localities have confidence, they will strongly and effectively support Bamboo Airways in comprehensively restructuring in the shortest and most effective time.
Luong Hoai Nam is a PhD in aviation in the Soviet Union (formerly), has more than 30 years of experience in the field of aviation and tourism, and has held many senior management and executive positions at airlines, such as Head of Market Planning Department and Editor-in-Chief of Heritage Magazine of Vietnam Airlines, General Director of Jetstar Pacific Airlines, Deputy General Director of Nam Long Real Estate Group, General Director of the Company Hai Au Aviation Joint Stock Company, Vice Chairman of Vietnam Tourism Association, and Deputy General Director of Vietstar Airlines.
TRADITIONAL AIRLINE MODEL ON THE LOW-COST AIRLINE BUSINESS PLATFORM
Q: Does the restructuring of Bamboo Airways affect the quality of passenger service?
A: Firstly, on behalf of Bamboo Airways, let me apologize to all customers who have been affected during the airline's recent restructuring process. We are implementing compensation methods in many different ways, such as refunding tickets, cooperating with other Vietnamese airlines to transfer passengers, or converting to Bamboo Airways' domestic services.
Regarding the business model, Bamboo Airways will not aim for a "5-star airline" model, as the high-end segment in the Vietnamese aviation market currently accounts for only 3-5% and is forecast to remain below 10% through the next 5 years. At the same time, our country has a low per-capita income compared to the top 6 ASEAN countries, not to mention compared to rich countries in Northeast Asia. That fact must be taken into account when choosing the business model and service design for Bamboo Airways in this comprehensive restructuring.
Bamboo Airways continues to maintain the business and economy classes, and we will develop these services in an "affordable" direction in order to serve the travelling demand of the majority of people with low and middle incomes and small and medium-sized enterprises (SMEs). Through market analysis, we have realised that about 30% of this market segment has not yet been effectively served by the existing services of Vietnamese airlines. We target to meet and satisfy the needs of those groups of people and thereby create and position the value of Bamboo Airways in society.
We will realise that goal through cost- and labour-saving methods in all of our service areas, and the most advanced methods of cost control and management. In doing so, we will be able to sell business-class tickets at cheaper prices than other airlines and economy-class tickets at the same price as budget airlines, but we still achieve the necessary efficiency to develop on a sustainable business foundation.
We will try to save every penny to offer cheaper ticket prices to Bamboo Airways passengers without reducing service quality, both in business class and economy class.
In business class, we will remove private lounges, which are luxurious but expensive, and turn to sharing Business class lounges with other airlines.
In economy class, we will classify the constituent services such that passengers will pay for the constituent services they use. If they do not use it, they do not have to pay for it. If a passenger initially buys a ticket without certain services and later wants to buy more, they can buy the additional services easily through all of our sales channels, or when checking in at the airport.
“We believe we can do it with the creativity and sense of responsibility of both the whole team and each individual.” Bamboo Airways CEO Luong Hoai Nam.
“We believe we can do it with the creativity and sense of responsibility of both the whole team and each individual.” Bamboo Airways CEO Luong Hoai Nam.
If someone says we plan to develop traditional-model aviation following the business model of low-cost airlines, it's not too wrong with what we will do. That is obviously very challenging, but we believe it can be done with the creativity and sense of responsibility of both the whole team and each individual.
From the board of directors to the entire Bamboo staff, we will try to save every penny to offer cheaper ticket prices to Bamboo Airways passengers without reducing service quality, both in business class and economy class. On-time flights and our dedicated service attitude are among the highly-appreciated outstanding advantages of Bamboo Airways, and we are determined to promote this in the new model.
“Following the COVID-19 pandemic, experts in the aviation industry believe that the potential growth of the aviation market will be more than 10% per year and will persist for at least the next five years. That is a very positive thing.” - Bamboo Airways CEO Luong Hoai Nam.
“Following the COVID-19 pandemic, experts in the aviation industry believe that the potential growth of the aviation market will be more than 10% per year and will persist for at least the next five years. That is a very positive thing.” - Bamboo Airways CEO Luong Hoai Nam.
Q: It is expected that the Terminal T3 in the Tan Son Nhat International Airport and the Long Thanh International Airport will soon be put into operation. How do you evaluate the prospects of the Vietnam’s aviation industry?
A: Following the COVID-19 pandemic, experts in the aviation industry believe that the potential growth of the aviation market will be more than 10% per year and will persist for at least the next five years. That is a very positive thing.
A persistent difficulty in Vietnam’s aviation industry is the overload of airports, especially at large airports, such as Tan Son Nhat. The government has taken drastic measures to push the Tan Son Nhat’s Terminal T3 project into operation as soon as possible. The progress of the Long Thanh airport project has also been promoted.
We expect the key airport projects will be implemented according to the government’s plan. This will be a huge improvement to the airport infrastructure of the Vietnam’s aviation industry. The number of flights handled at Tan Son Nhat Airport will increase upon the completion of Terminal T3 and accompanying works. The operation of the first phase of Long Thanh Airport will also expand the capacity of the country’s airport infrastructure.
The launch of airport projects as planned will open opportunities to further raise operations of airports. Those are good developments for Bamboo Airways’ recovery and growth plans after restructuring. (Video: Trung Hieu)
The launch of airport projects as planned will open opportunities to further raise operations of airports. Those are good developments for Bamboo Airways’ recovery and growth plans after restructuring. (Video: Trung Hieu)
The launch of airport projects as planned will open opportunities to further raise operations of airports. Those are good developments for Bamboo Airways’ recovery and growth plans after restructuring.
We expect that future airport infrastructure development will also be conducted at other airports, such as Noi Bai, Vinh, Phu Cat, and Cat Bi, to provide sufficient airport infrastructure for smooth operation and development of airlines.
Thank you!
Published: November 2023
Production manager: KIM PHUONG BINH
Content: KHANH GIANG - TRUNG HIEU - HOAI THU - XUAN BACH
Design: BAO MINH
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