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Vietnam Airlines to Choose Strategic Investor as IPO Moves Ahead

Sept. 4 (Bloomberg) -- Vietnam Airlines Corp., the national carrier, plans to select a strategic investor as early as the fourth quarter as it prepares for an initial public offering next year.

The national carrier considers the equitization as a “key mission” in 2013 and is moving the process “as fast as possible,” it said in an e-emailed statement yesterday in response to Bloomberg questions. A corporate evaluation report is expected to be completed this month to submit to authorities for approval, the Hanoi-based airline said in the statement.

The plan has been revived as VietJet Aviation Joint Stock Co., the country’s only privately owned carrier, said last week it’s considering an IPO to fund expansion. The government has been trying to conduct an IPO of state-owned Vietnam Airlines since at least 2010 amid intensifying domestic competition. The company expects to hold the share sale in the second half of next year, after a planned offering in 2012 was delayed twice.

“It makes sense for them to move toward an IPO,” said K. Ajith, Singapore-based director of Asia transport research at UOB Kay Hian. “The risk faced by Vietnam Airlines is market penetration by low-cost carriers.”

Vietnam Airlines said it has been working with advisers including Morgan Stanley and Citigroup Inc. to evaluate its assets for equitization.

Market Woes

The benchmark VN Index of Vietnamese stocks has decliend 11 percent from this year’s high on June 7. The slump has slowed down Vietnam’s equitization process, Dominic Scriven, the chief executive officer of Ho Chi Minh City-based fund manager Dragon Capital, said on behalf of the Capital Market Working Group at a conference in June.

Vietnam Airlines CEO Pham Ngoc Minh said in March last year that the market was “attractive” for a sale.

The company carried about 7.3 million passengers in January through June, a 6.4 percent increase from the same period last year, it said in the statement. The company said it expects to carry 14.4 million passengers this year, up from 13.5 million in 2012.

VietJet, which started flying in December 2011, has increased its share of domestic seat capacity in Vietnam to about 20 percent, compared with 67 percent for Vietnam Airlines, according to a research note today by CAPA Centre for Aviation.

VietJet said last week it is now profitable, with pretax profit in the seven months ended July of about 120 billion dong ($5.7 million), and that it’s considering an initial share sale in 18 months to 42 months. The sale would help fund expansion that would include international markets beyond Bangkok, its only current overseas destination.

To contact Bloomberg News staff for this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net

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

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