VietJet Said to Plan $10 Billion Airbus Order to Expand

VietJet Aviation Joint Stock Co., Vietnam’s only privately owned carrier, plans to sign an agreement today to procure 100 planes from Airbus SAS, with deliveries starting next year, a person familiar with the plan said.

The planes are valued at between $8 billion and $10 billion based on list prices and the type of aircraft to be delivered over the next 10 years, the person said, declining to be identified as the information isn’t yet public. VietJet is getting the A320 family of single-aisle jets, and some of them will be leased from the Toulouse, France-based planemaker, the person said.

The budget airline is considering an initial share sale to fund its expansion, Managing Director Luu Duc Khanh said in an interview last month, as a surge in Asia-Pacific travel demand prompts carriers such as AirAsia (AIRA) Bhd. and PT Lion Mentari Airlines to buy new aircraft. Airbus yesterday predicted airlines globally will buy planes valued at $4.4 trillion in the next two decades, driven by demand in India and China and growth among low-fare airlines.

“VietJet is signaling that they are ambitious and want to break into the region, not just focus on their domestic market,” said Brendan Sobie, Singapore-based chief analyst at CAPA Centre for Aviation. The market is “very competitive, although it’s growing.”

Agreement

VietJet plans to sign an initial agreement with Airbus as early as today, coinciding with Prime Minister Nguyen Tan Dung’s visit to France, the person said. The person declined to say how many of the orders will be on a firm basis or options.

“We do not comment on commercial discussions related to potential aircraft orders,” Sean Lee, an Airbus spokesman in Singapore, said in an e-mailed statement. A phone call to Pritam Singh, the airline’s vice president of business development, wasn’t answered.

Reuters, citing officials it didn’t identify, reported yesterday the airline planned to get between 92 and 100 Airbus aircraft, of which 60 would be firm orders and 30 would be options.

VietJet may hold an IPO within 18 months to 42 months, Khanh said in an interview last month. The airline posted pretax profit of about 120 billion dong ($5.7 million) in the seven months ended July, Khanh said. The Hanoi-based carrier lost money in 2012, he said, declining to give figures.

Overseas Routes

The budget airline, which started operations in December 2011, began flying overseas in February. VietJet is planning more overseas routes, with passenger growth in the Asia-Pacific region to surpass that in Europe and North America through 2016, according to a forecast by the International Air Transport Association.

VietJet increased its share of capacity in Vietnam’s domestic aviation market to 20 percent as of late August from 14 percent in mid-July by adding frequencies on routes with new aircraft, Sobie said earlier.

The market share is ahead of Jetstar Pacific Airlines Aviation Joint-Stock Co.’s 12 percent, according to data from the CAPA Centre for Aviation. Jetstar Pacific is a unit of state-owned Vietnam Airlines Corp., which controls 68 percent of the market, according to data from CAPA.

Across Southeast Asia, budget airlines including AirAsia, Jetstar Asia Airways Pte. and Lion Air are winning fliers as spending ability increases, enabling more people in the region to travel.

To contact Bloomberg News staff for this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net; Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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