State and solutions to enhance vietnam airlines’ capital mobilization

1.4 Scope of the research- Audience research is the subject of theoretical issues and practical in terms of capital, methods to raise capital and the state of funding in VNA - The scope

My most sincere gratitude to:

First and foremost, I deeply grateful to my supervisor Nguyen Thanh Ha for encouraging me to pursue this topic I am truly appreciated his valuable advices on writing outline as well as the thesis I am also grateful for his great support, constructive feedback and thorough understanding to keep me hardworking and speed up my progress on the work

I would like to thank all enthusiastic staffs at financial department in Vietnam Airlines, especially Mrs Phan Diem Anh and Mr Nguyen Minh Duc– the managers and Mrs Nguyen Kim Nhung- the executive to help and provide me with insights, statistics, and other supporting documents for my research

Finally, I would like to thank the National Economics University for four years

of quality education I extend my sincere appreciation to all my respectable tutors and lecturers in National Economics University who have provided me with essential knowledge about finance and banking, also my family and friends have encouraged and inspired me a lot

Without these supports, I would not complete this research as it is today

Phan Thu Thuy

TABLE OF CONTENT

IATA International Air Transport Association

IOSA IATA Operational Safety Audit

AQS Aviation quality services

BOD Board of director

SCIC State capital Investment Corporation

ECA Export credit agency

OECD Organization for Economic Cooperation and DevelopmentSEK Swedish export Credit Corporation

CLMV Cambodia Laos Myanmar Vietnam

FTA Free trade agreement

AEC Asian economic community

IPO Initial public offering

ODA Official development assistant

VALC Vietnam aircraft leasing company

SEK Swedish Export Credit Corporation

SPC Special Purpose Company

LIST OF TABLES

LIST OF FIGURES

CHAPTER 1: INTRODUCTION1.1 Rationale

To begin a business, an indispensable element is to have capital So the issue is how to improve efficiency and raise capital in enterprises in Vietnam which is now a top concern of businesses To have an efficient business and to have effective production, right from the beginning of the process of manufacturing, enterprises need to have money to invest and to use that capital in the most efficient way Over the time studying at the National Economics university and the internship in Vietnam Airlines Joint Stock Company under the guidance of my supervisor Nguyen Thanh

Ha Assoc.Prof.Phd and employers and employees in the company , I have chosen the

topic "State and solutions to enhance Vietnam Airlines’ capital mobilization " to be

my graduation thesis This subject is not new, however, it is the matter of urgency and necessity to each business

1.2 Research objectives

The purpose of the research study:

- Look into the rationale of capital, funding and methods of raising business capital of the enterprise in the economy market

- Analyses to assess the status of the company of raising capital over the years, clarify success and limitation in the activities of the company Since there to propose solutions to strengthen the company's capital mobilization in VNA

To understand further on how the study’s objectives will be achieved, there are two big questions introduced:

1 What are the factors affecting the capital mobilization activity in

Vietnam Airlines’ head office?

2 What can the company do to deal with the current existences in

mobilizing capital?

1.3 Research methodology

- Use of statistical analysis methods, comparison, investigation, analysis, integrating assessment system to assess the situation of raising capital in the joint stock company VNA

1.4 Scope of the research

- Audience research is the subject of theoretical issues and practical in terms of capital, methods to raise capital and the state of funding in VNA

- The scope of the study of the subject: capital mobilization activities at the joint stock company Vietnam Airlines

1.5 Research structure

Besides the abstract, table of contents and conclusion, the thesis is structured into four chapters:

- Chapter 1: Introduction

- Chapter 2: Theoretical framework on fund mobilization of enterprises

- Chapter 3: General condition of fund mobilization in Vietnam Airlines’ head office recently

- Chapter 4: Some solutions to enhance Vietnam Airlines’ head office

CHAPTER 2 THEORETICAL FRAMEWORK ON FUND MOBILIZATION OF ENTERPRISES

2.1 Fund of enterprises

2.1.1 Definition of enterprise’s capital

Many economists on behalf of different schools of economics had have different ideas on capital According to Karl Marx (1858), capital is money used to

buy something only in order to sell it again to earn profit which is named ‘surplus value’ For Marx, capital only exists within the process of economic exchange and it formed the basis of the economic system of capitalism In Economics book of Paul

A Samuelson (2010 edition), capital was defined as “a produced and durable input which is itself an output of the economy” and “has to be produced before you can use it” From this, we can see that one common point in these concepts was capital to be input factor for a business Therefore, we can perceive capital as total initial value, participating in the next processes of the business This concept not only shows that capital is an important input for the manufacturing enterprises, but also refers to the participation of the capital in business and in the continuous process of business and production throughout the business lifetime Thus, capital is the number one factor of all activities of a manufacturing business Capital helps enterprises expand production and business, procurement of equipment or carry out new plans in the future Therefore, it is required that businesses need to have the effective management and use capital efficiently to preserve and develop the capital in order

to ensure strong growth for enterprises

There are some basic characteristics of capital:

- The capital must represent a certain amount of property It means that capital must

be represented by the value of tangible assets and intangible assets of the business

- The capital needs to mobilize and generate profit, achieving business goals

- The capital must be accumulated and concentrated to a certain amount, thus it

is able to promote ability when investing in the economic fields, particularly in the field of business

- The capital has value in term of time This can play an important role in putting capital in investment and efficiency of capital use

- The capital has to associate with certain owners, which will not be put into investment if its owners think it is not profitable

- The capital is conceived as a commodity and can be considered a special commodity because it is capable of being traded ownership in the capital market, the financial market

- The capital is not only manifested in cash (fixed assets of the business: machinery, equipment and supplies for management activities and so on) or the tangible assets (patents, the invention, and others)

2.1.2 Role of capital in enterprise

Business resources play a very important role in every business It is the foundation and the premise for a start-up business For business registration, as prescribed by Enterprise Law, any business has to own enough legal capital in its business lines (which include not only cash, bank deposits, but also the property owned by the business owner) Then to conduct business’s production, business also has more fund to rent, buy machinery and equipment, technology, materials, hire labor, etc All these conditions required a business to proceed and maintain its activities in order to achieve the goals.

In addition, in the process of business activities of enterprises, the factors for enterprises to expand production both in width and in depth are machinery innovation, improving product quality, increasing jobs, increasing incomes for workers as well as fully functional organizational management Consequently, they improve the business efficiency and enhance the competitiveness of enterprises in the market

Regarding the current situation of the trading market in our country, the lack of capital for production and business development is a matter of urgency Not only at the micro level, but our government is also relatively short of investment capital for economic development This is demanding Vietnamese businesses to look for ways

to mobilize and use capital in the most effective way

2.1.3 Capital categories

Corporate’s capital is usually divided into several different sections and each different combination depends on the purpose, duration, and nature of the use of capital that people divided into different categories:

• In terms of the role and nature of circulation, capital entering into production and business processes can be classified into two types: Fixed capital and working capital

Fixed capital

Assets or capital investments that are needed to start up and run business, even

at a minimal stage These assets are considered fixed when they are not used up in the actual production of a good or service, but have a reusable value Fixed-capital investments are typically depreciated on the company's accounting statements over a long period of time, up to 20 years or more Its characteristics are partially rotated slowly in many production cycles and complete one cycle when fixed assets are up to expiration date

The scale of capital more or less fixed will determine the scale of fixed assets and greatly affect the level of technical equipment and technology, the production capacity of the enterprise business Contrary to the economic characteristics, the fixed assets used in this process have a decisive influence and the dominant characteristics of circulating and fixed capital flows.

Fixed capital involves in many business and production cycles of enterprises with long turnaround times Depending on the form of existence and nature, fixed assets of the business are divided into three categories: tangible fixed assets, intangible assets, financial fixed assets

Intangible fixed assets are not specific physical forms, which represent a value

of the investment was directly related to the business cycle such as the cost of land use, the cost of purchasing patents, patents or trademarks, goodwill value and so on

An intangible asset can also be formed by enterprises for investment or long-term lease

Tangible fixed assets are mainly labor material, which is expressed by the

specific physical forms such as buildings, machinery, equipment and transport means, the structures and so on These tangible fixed assets may be the properties of each agent which has an independent structure or a system This system consists of many parts of assets linked together to perform a function or a certain number of production processes Tangible fixed assets may be due to self-shopping business, construction or long-term lease

Financial fixed assets are the value of financial investments with the purpose of

long-term investment for profit such as long-term capital to the joint venture and lease of fixed assets These long-term investments take a long time to recover (greater than one year or a business cycle)

Fixed capital is gradually rotated partial value When involved in the production process, the properties are not changed from the original shape but kind features and capacity are reduced, which means this together with the declining value

of its use as well are diminished Fixed capital is split into two sections:

A portion corresponding to amortization are transferred to the product value in the form of depreciation expense and accumulated depreciation funds into commodities after being consumed Depreciation fund is used for reproduction of fixed assets in order to maintain the production capacity of the enterprise

The rest of the fixed capital is "fixed" in-kind form of fixed assets grew less while the increasing working capital corresponding to a gradual decline in the value

of used fixed assets Ending the process is when the fixed assets of the time have been used and fixed capital has also completed a round rotation

Typically, the fixed capital is an important part and occupies a large proportion

in the total capital of the enterprise business Its characteristics follow its own rules,

so the management and use of WC should reasonably have a direct impact on the efficiency of production and business capital

Working Capital

Working capital in the business is cash in advance for capital to invest, purchase assets of the business to ensure the continuous process of production and business

In business it is common to divide assets into two categories: production assets and circulating assets Production assets include all kinds of materials and fuel, spare parts, semi-finished products, unfinished products reserves and so on which are in the process of production or processing Circulating assets include finished products awaiting consumption, the type of capital in cash, in payment of the funds, the pending transfer costs, prepaid expenses

In the process of production and business, the manufacturing assets and property are always in movement, circulation and replacement and switches of one another in order to ensure that the production process takes place continuously incessant

Working capital is only involved in the production cycle and does not retain the original material form So its value always varies, once on the value of the product From the beginning of circulation of capital, working capital shifts from initial morphological monetary into the capital reserve supplies and capital goods production At the end of the cycle, after the product is consumed, working capital of some currency returns to its starting point

The process of production and business of enterprises should be constantly based on a regular basis that coincides with working capital exist in different forms

in the field of production and circulation

When the period of capital movement is intertwined, the production cycle is repeated After each reproductive cycle, working capital completed a round of

•Based on the establishment, capital formation is divided into two types: Equity and liabilities.

Equity

Equity is the capital owned by the enterprise, the enterprise has full rights to possess, dominate and dispose This capital is not a loan and does not have to commit payments at once Depending on the type of enterprises of different economic sectors, equity has its own specific content, such as investment capital from the State budget, capital spending by business owners and equity Equity is defined as the remaining stake in the assets of the enterprise after deducting all liabilities

To pay debt

Is debt incurred in the course of business which now has a responsibility to pay for the economic agents That is the amounts of capital that the enterprise borrows or misappropriate from other agents, organizations and individuals For example, they can be loans from commercial banks, other financial institutions, loans through the issuance of bonds and the customer debts unpaid

•Based on timing resources mobilization: Regular funds and temporary funds.Based on the time of mobilization and use of capital funds, businesses can divide into two categories: regular capital resources and temporary funding

Regular funds

As funding from one year including equity sources and long-term loans This is the nature of capital stability that businesses can use for investment in fixed asset purchases and a division of minimum liquid assets necessary for the regular business activities of enterprises

Temporary capital

This is capital in nature short-term (less than one year) that businesses can use

to meet the temporary demand, abnormal rise in production and business activities of enterprises This capital consists of short-term loans of banks and credit institutions and other debts

The classification of regular funding and temporary helps fund managers to consider raising funds in a reasonable manner with the duration of use, timeliness of capital for production and business activities and enhance the efficiency of business capital

This classification also enables business managers to establish a financial plan intended to form the organization and funding in the future on the basis of determining the appropriate size for each fund, the organizational using effective capital

2.2 Methods of mobilizing fund of enterprises

2.2.1Equity financing

Equity is the capital owned by the business owner and the members of the joint venture company or the shareholders of the joint stock company There are three sources to make up equity: the amount of capital contributed by the investors, the total amount of money generated from the results of production and business activities (undistributed earnings) and the differences upon asset revaluation

Equity including venture capital (cap and undistributed profit), the difference in revaluation of assets and funds of the business such as development funds, reserve funds, bonus and welfare fund and so on In addition, equity investment also includes construction and business funding (funding from the State budget’s allocated grant, etc)

When the business was established, it must have a certain initial capital contributed

by shareholders When it comes to funding of the business, owners always have to consider the form of ownership of that business Because the form of ownership will determine the nature and form of capital creating their own businesses For state enterprises, the initial capital is invested by the State and the owner is the State Government For business enterprises according to law, business owners must have a significantly initial capital to apply for registration of the establishment of enterprises For example, for joint stock companies, capital contributions from shareholders are a decisive factor for company formation Each shareholder is an

owner of the company and has limited liability on the value of shares they hold In these types of businesses, such as limited liability companies, companies with foreign direct investment, capitals are similar to above; and are spent by the owners, the parties and the partners, etc.

•The capital from undistributed earnings

Accrued capital from undistributed earnings is used to reinvest

The size of the paid up capital of the shareholders is a key factor, however, this capital should be increased according to the size of the business development In the process of production and business activities, if enterprises operate efficiently, the enterprise will have favorable conditions for capital growth

For State enterprises, the reinvestment depends on not only the profitability of the business itself but also the reinvestment policy of the State For joint stock companies, when companies take an amount of profits to reinvest, and it means not using it to give dividends, shareholders are not allowed to receive dividends; however, in return, they gain ownership of the increasing share of the company On one hand, it encourages shareholders to hold shares for long term On the other hand,

it reduces the attractiveness of the shares in the period ahead since shareholders receive a smaller dividend

The initial capital and retained earnings are seen as the self-financing of the business This form has a number of advantages and disadvantages:

- Advantages:

+ Enterprises do not rely on outside sources (for example: Banks)

+ Increasing financial autonomy of enterprises

+ Helping businesses with easier credit relationships with banks, credit institutions or shareholders

+ Retained earnings resources have a huge impact on business capital and provides the company opportunities to earn higher profits next year

Common stock: A type of shares issued by retained earnings source or other

legal ownership capital sources of the joint stock company and there is no special priority in the payment of dividends or assets liquidation when the company is bankrupted.

Preferred shares: a type of share issued by retained earnings source or

other legal ownership capital sources of the joint stock company but there is a special priority in the payment of dividends or assets liquidation when the company is bankrupted

When issuing preferred shares, enterprise increase ownership as well as not sharing the leadership, the issuance is still attractive to investors by guaranteed relatively stable dividend yield Typically preferred shares account for only a small proportion of the share capital of the company

2.2.2 Debt financing

•Bank loans

Bank loans are one of the most important sources of capital, not only for the analysis of the business but also for the entire national economy In the operation process, bank loans secure financial resources for production and business activities, especially to ensure sufficient funding for the expansion project of intensive investment of business

- Raising bank loans method

Loans to businesses investing in fixed assets and projects can serve the bank loans in the form of pledge or mortgage of assets, through the third party to guarantee to be lent or borrow in form of installment

+ For large enterprises, enterprises can use their credibility with the bank (payment of the debt on time, customer’s familiar ) to unsecured loans

+ Small and medium enterprises, which has the property pledged as collateral, can only lend bank small amounts of capital If it is not enough capital for production and business activities, they may ask reputable 3rd party to guarantee or participate

in a credit guarantee fund for small and medium enterprises and so on

Enterprise borrow to supplement working capital: the bank can lend in the form

of overdraft loans, direct loans each time, property mortgages, unsecured loans

- Features of bank credit funds

- Loan conditions: businesses, who expect to borrow from banks, should have the following conditions:

+ Legitimate loan purpose

+ Financial ability to guarantee to repay liabilities on time

+ There are effective investment projects, plans for production, feasible services, and in accordance with the provisions of law

- Procedures for loan: To borrow from banks, businesses need to prepare the loan applications, including:

+ Request for loan

+ Business License

+ Project, production and business plan, repayment plan

+ Profile of pledged collateral

+ Profile of other documents required by the bank

- Interest rate: for loans, banks, businesses often have to bear the interest rate depends on the tenor of the loan, the relevant enterprises to incentives or not Interest rates now typically pay a fixed rate

- Tenor: businesses can borrow bank in the form of short, medium and long term

- Risk - liquidity pressure: Periodically, the enterprise must pay interest to the bank, even if the business does have profits, otherwise business will be subject to penalty of interest rates of banks To pay the principal due, if businesses lose the ability to pay, the guaranteed assets of the enterprise be held forever or the third party guaranteed for the loans will be liable to pay on behalf of the enterprise This caused a very negative influence on the reputation of the banking business

-Advantages and disadvantages of bank credit funds

Advantages:

+ For large enterprises:

Focus simultaneously large capital

Lower level of risk than small businesses

+ For small and medium enterprises: Nowadays, small and medium enterprises get a lot of help from the state to be able to access to this fund

Disadvantages:

+ Credit conditions: The commercial banks for business loans always want to ensure the safety of credit and limit the risk through a system of credit safeguards such as:

Analysis Profile loan application

Review the information relating to investment projects

Production and business plan of the first business loans

- The control of the lender: is now under the control of the bank on the intended use and the use of loans

- Interest rate: reflects the cost of capital, used bank credit depending on the situation on the market in each period

•Commercial credit

Trade credit is credit relations between enterprises, and it is performed in the form of credit selling and purchasing, deferred purchase or installment payment of goods It is a very common type of credit in international credit, a type that businesses lend each other, without the involvement of banks or it is the type of credit granted by cargo service rather than in cash When the deadline is agreed, business buyers must repay both principal and interest to the enterprise in terms of currency.

- When businesses purchase raw materials, goods are not paid immediately as enterprises have been the supplier for this kind of loan It should also be known as credit providers

- To ensure that the buyer must pay the bills on time, in addition to loyalty, the credit seller shall also require legal evidences, which are certified papers bear the trade mentioned above These papers can be created by creditors requesting the return of money, or because buyers paid up to commitments They are known as commercial papers

There are three types of commercial credit:

+ Commercial credits granted to importers;

+ Commercial credits granted to exporters;

+ Broker credit for exporters and importers

The pros and cons

- Advantage:

+ Handy and flexible in business

+ Helps businesses expand business relations in a sustainable way

+ Actively when mobilizing and raising capital are fast, easy

+ Not subject to the supervision of banks as well as state agencies

- Disadvantages:

+ Restrictions on the size of the credit: the number of purchaser and supplier's capabilities

+ Restrictions on objects borrowed

+ Restrictions on borrowed space

+ Depending on the business relations of production on the market

+ Easy chain risk

•Issuance of corporate bonds

Bonds are certificates or book-entries that confirm debt collection rights and legitimate interests of bond holders for the assets of the issuer

Classification:

- Bonds with fixed interest rates: the corporate bonds which businesses must pay a fixed interest rate and they are regulated at the time of release

- Bonds with floating rate means that corporate must pay a floating interest rate according to market interest rate or adjustment of businesses.

- Bonds can be recalled: the kind of bond that now can be withdrawn with an earlier deadline

- The bonds can be converted: the type of bond, which allows the bondholder to

be entitled to convert into a number of common shares at a price determined identified and in a certain time period

Characteristics of raising capital from the issuance of bonds

The conditions and procedures for the release: Depending on the countries and territories in which conditions require various procedures:

In Vietnam, businesses that want to issue bonds must have the following conditions:

- Joint stock companies, limited liability companies, state-owned enterprises must have contributed chartered capital at the time of registration issued at least 10 billion

- Business activity in the year preceding the year registered the issue must be profitable

- Must have held underwriting

- Scale release: enterprise only issued a certain amount of bonds under the authorization of the State Securities Commission

- The duration and interest rates: bond yields generally lower lending rates and the bank's common stock dividend

- Payment method: Businesses can pay by the method of the previous interest payment or interest payment in arrears

- Liquidity pressure: businesses have to pay annual bond interest and repayment

of principal at maturity

2.3 Factors affect fund mobilization in enterprise

2.3.1 Direct factors

2.3.1.1Financial performance of enterprise

Financial viability factor of the business includes such factors as:

- Scale of investment capital

- The ability to mobilize short-term and long-term

- The flexibility of the capital structure

- The level of financial management and accounting of businesses

Finance is an important factor, affecting virtually all areas of business activity Investment scale and the ability to raise capital decide the scale of the company's activities in the market It captures large opportunities and brings more profits to the company It also outlines the application of modern technologies in production and

business and affects the competitiveness of businesses in the market.

Finance department –plays an important role in production and business activities of enterprises It carries out the task of controlling the financial spending regime and the management of resources on a system of the book closely This department provides necessary information and accurate for administrators

2.3.1.2Capital structure and costing

Capital structure: reasonable capital structure lay out, which improves the efficiency in use of capital Arranging inappropriate capital structure as imbalance between current assets and fixed assets, which results in an excess or lack of certain types of assets will reduce the efficiency of capital use

Return on sale

ROS = Net income (before interest and tax)

SalesReturn on sale is the ratio of total pre-tax profits earned from business activities, financial operations and activities arising in a year of the business, providing services and other incomes

Return on equity

Shareholder’s equityROE is the ratio of total profit before tax is collected for production and business activities, financing activities and other activities during the year divided by the total business of funding per year

Working capital turnover

Working capital turnover = Sales

Working capital

Determine the date of completion of one operating cycle of the business Too low turnover proves recoverability of goods, low freight movement ability

is low, slow flow of capital, and increased cost of capital It will reduce the effectiveness of business operations

2.3.2 Indirect factors

2.3.2.1Macroeconomic policy

The regulatory role of the government in the market economy is indispensable This is stipulated in the Resolution of the Party Central Committee Mechanisms and policies have a significant impact on the financial position of the business For example, the mechanism of capital allocation, revaluation of assets, changes in tax policies (VAT, corporate income tax, import tax, etc), lending policy, protection and promotion import technology consolation all affect production and business processes of the enterprise and then affect the financial situation

2.3.2.2Financial market development

Financial market is an important factor to business operations of the business Herein, the capital market is responsible to raise capital for businesses, while commodity market is responsible for using the funds Product sales market has a major impact on sales and profitability of the business These markets’ stable development will be a positive factor in promoting business expansion as well as reproducing and increasing market share

Therefore it can be said that financial market factor has significant impact on the financial position of the business

2.3.2.3International economy effects

State of the economy indirectly affects the financial position of the business When economy grows strongly and stably, enterprise will create more business opportunities, such as raising capital and investing in large projects, and they have various opportunities to choose their partners

When economy grows along with the advancement of science and technology, the efficiency of production and business activities of enterprises is increased as well Because when science and technology thrive, it will put businesses in fiercely competitive environment If the business does not adapt to this environment, it will certainly not survive Therefore, the enterprise has always focused on technology investments In addition, modern machines not only save human labor, but also generate a high volume of products at low cost to satisfy customer needs Consequently it will increase the revenue and profit of the business, because the businesses actively encourage production and the financial situation of enterprises will be also improved Conversely, if the state of the economy is in a recession, businesses, which want to improve the financial situation will encounter numerous

difficulties and challenges.

CHAPTER 3 ANALYSIS OF DATA GENERAL CONDITION OF FUND MOBILIZATION

IN VIETNAM AIRLINES’ HEAD OFFICE RECENTLY3.1 Overview of Vietnam Airlines’ head office

3.1.1 General information of company

- Official name: Vietnam Airlines JSC

- Short name: Vietnam Airlines

3.1.2 History, establishment and development

The history of Vietnam Airlines started on January 1st, 1956, when the Civil Aviation Department was established by the Government, marking the birth of the Civil Aviation industry in Vietnam At that time, the fleet was small with only five aircraft of IL-14, AN-2, Aero-45… which started to serve domestic flights in September 1956

April 1993, Vietnam Airlines was officially established as the country’s national flag carrier On 27th May 1995, Vietnam Airlines Corporation was born with the gathering of 20 aviation enterprises and the airline itself as the core business

Over more than 20 years of development, the Corporation Vietnam Airlines has contributed significantly to the development of Civil Aviation of Vietnam as well as significant contributions to economic development, social and national industrialization and modernization of the country

On 20th October 2002, Vietnam Airlines introduced the new logo of the Golden Lotus and corporate identity that symbolized its dramatic progress towards

becoming a world-class airline This launch represented a complete repositioning and brand strategy of Vietnam Airlines, coupled with significant improvements in its infrastructure, operations and fleet.

The delivery of its first own “state-of-the-art” B777 in 2003 also marked a true revolution in the airline’s fleet modernization Nowadays, Vietnam Airlines operates one of the most modern fleets in the region with the average age of the fleet is 5.4 years

For 20 years of development at an average annual growth rate consistently in double-digit number, the national flag carrier has marked an obvious advance to become a major competitor in the Asian aviation market, owning a modern fleet of Airbus and Boeing planes flown by well trained professionals

Beginning with non-regular domestic services, today Vietnam Airlines operates flights to 21 cities throughout the country and 28 international destinations in Asia, Europe, and Australia Its network has been extended to 26 countries and territories

In 2006, after being awarded the IATA Operational Safety Audit (IOSA) certificate, a strict safety standard set by Aviation Quality Services (AQS), Vietnam Airlines joined the International Air Transport Association (IATA) as an official member, affirming its international standard

In June 2010, Vietnam Airlines joined SkyTeam, the world’s second largest global airline alliance, affirming the carrier’s new position on the global aviation map as the strategic partner of the alliance in Southeast Asia region as well as its international standard services

Positioning its internationally recognized brand as a young and modern carrier, Vietnam Airlines excelled further when signing large purchase orders of world’s most modern, environment-friendly aircraft, such as Boeing B787 and Airbus A350-900 The airline is expected to reach 101 and 150 modern aircraft in

2015 and 2020, respectively, making solid steps integrating into the global aviation industry as one of leading regional carrier, which is fully ingrained with Vietnamese traditional culture

Table 3.1: Timeline of Vietnam Airlines development

1956 The Department of Civil Aviation was established by the Government, marked

the birth of the industry Vietnam Civil Aviation

1993 Founded Vietnam Airlines

1995 Established Corporation Vietnam Airlines include National Airline Vietnam and

20 enterprises in the sector

2002

Vietnam Airlines introduced the new logo – Golden Lotus associated with improvements, superior quality of service, network expansion and especially upgrading VNA fleets

2003

Reorganization has operated as the parent company - subsidiary under Decision

No 372 / QDTTG dated 04/04/2003 of the Prime Minister Receiving and put into operation the Modern aircraft with many premium features Vietnam's first Boeing 777, the event started program to modernize the fleet

2006 Become an official member of IATA

2009

Cooperate and support the Government of Cambodia established the Cambodian airline Angkor Air, the chartered capital of US $100 million, of which Vietnam Airlines contributed 49%

2010 Converted into a limited liability company one member by the State as an owner;

primarily became the 10th member of the global airline alliance Sky Team

2012

Reception manager of shareholder capital contribution in the State Joint Stock Company Customers Jet star Pacific, becoming the largest shareholder with a 68.46% holding ratio chartered capital

01/2013 The transportation department’s approval of time for equitization of parent

company – Vietnam Airlines is on 31/03/2013

05/2014 The transportation department’s approval of value of joint stock company – the

parent company Vietnam Airlines

09/2014 Prime Minister approving the equatization plan of parent company – Corporation

Vietnam Airlines

11/2014 Vietnam Airlines completed the initial public offering shares to the public

03/2015 Vietnam Airlines General Meeting of Shareholders for the first time based on

joint stock company’s regulations

(Source:VietnamAirlines.com)

Table 3.2: Awards and achievements of Vietnam Airlines through years

1996 First Class Labor Medal awarded by the President

1997 First Class Labor Medal awarded by the President

2000 Certificate from foundation of supporting technical creativity Vietnam

2001 Certificate from Prime Minister

2003 Third class labor medal awarded by the president

2005 Sao Khue award

2010 Ho Chi Minh medal awarded by the president

2010 Third prize medal of national protection awarded by the president

2011 Second class medal of labor awarded by the president

2011 Government's Emulation Flag (Third Prize) in emulation block of the Group and

3.1.3.2 Duties and functions of departments

•General Meeting of Shareholders

Shareholders General Assembly is the highest decision organ of Vietnam Airlines, including all shareholders with voting rights, operating through the General Meeting of Shareholders Annual General Meeting of Shareholders Extraordinary and through written comments.

•Control Board

Supervisory Board is the body by the General Meeting of Shareholders elected,

on behalf of shareholders to control, evaluated independently, objectively and truthfully all business operations, governance and Operating Vietnam Airlines, the real financial situation of Vietnam Airlines and responsible the General Meeting of Shareholders in performing the tasks assigned to them

•Board of Directors (BOD)

The Board shall manage Vietnam Airlines, has full authority to represent Vietnam Airlines to decide, to exercise the rights and obligations of Vietnam Airlines does not belong competent General Assembly of Shareholders

•General manager

General Director is the legal representative of Vietnam Airlines and is the operator Daily operations of Vietnam Airlines

•The function rooms

The Committee of the Board of Directors by the Board to help the establishment, including the Committee and investment strategy,

Commission personnel and salaries, internal audit committees The Commission worked in the model concurrently The expert committee of the Corporation at the function to perform the tasks help for the Committee established

by the Board

Assisting apparatus common to the Managing Board and General Manager: is the Deputy Director General, Chief accountant, office, professional committees, professional and equivalent bodies The Corporation has the function of advising and assisting the Board of Directors and Chief Executive Officer in management and administration tasks

Organizational structure of Vietnam Airlines' operations include: Headquartered in Hanoi with 16 professional departments; 33 branches and

representative offices abroad; 14 subordinate units domestic In addition, Vietnam Airlines contributed capital invested in subsidiaries and associated companies.

3.1.4 Business activities

• Passenger transportation through aviation

•Management consultancy activities:

- Investment, manage investment sources and directly produce business production; Invest abroad; purchase and sale of businesses; stockholding dented or capital transfers contributions, the sale of shares

•Air freight:

- Transportation of baggage, cargo, parcel, postal, mail

•Service activities support directly to air transportation:

- General aviation activity (terrain flying photography, geological surveys, repairing and maintaining high voltage lines, serving the oil and gas, forestry, environmental inspection, searching and rescuing, emergency medical services, flight’s purpose of political, economic, social, security and defense tasks);

•Other aviation services;

- Delivery of commercial services, tourism, hotels, duty-free sales at the aviation station and other provinces and cities; other aviation services;

- Providing technical services for ground commerce; services for passengers in terminal station, terminal cargo and apron services at airports

Repairing and maintenance of vehicles (except automobiles, motorcycles, motor vehicles other agencies): maintenance of aircraft, engines, spare parts, aviation equipment and facilities other technical equipment

•Manufacture of equipment of measuring, checking, navigating and controlling

- Production of components, parts, supplies and aircrafts, technical equipments and the content of other sectors in the aviation industry

- The provision of technical services and spare parts for the airline in domestic and foreign

•Other services support activities related to transportation

- Freight services; mining and investment and technical infrastructure at the airport: terminal passenger, cargo, technical infrastructure and services in sync air transport chain;

- Multimodal transportation

•Production of aircraft, spacecraft and related machinery

- Import and export of aircraft, engines, spare parts, aviation equipment (rent,