VietJetAir nears huge Airbus order

Screen shot 2014-01-30 at 10.10.16 AM

Vietnam’s first private airline, VietJetAir, said Wednesday it was close to finalising a US$6.1 billion Airbus order as part of an ambitious expansion that has shaken up the communist country’s once tightly controlled aviation industry.

Like many sectors of the economy, aviation was for years dominated by state-owned flag carrier Vietnam Airlines until the government eased restrictions, paving the way for low-cost carrier VietJetAir to launch in 2011.

Amid growing demand for air travel both domestically and regionally, competition in the industry has recently heated up with fleet expansions, new routes and a planned stock market flotation for Vietnam Airlines later this year.

The Airbus deal is expected to be signed at the Singapore Airshow next month, VietJetAir managing director Luu Duc Khanh told AFP.

VietJetAir and Airbus signed a letter of intent in September for the purchase of 62 A320 medium-haul aircraft worth US$6.1 billion at catalogue prices and options for another 30.

The low-cost carrier, which currently serves 11 cities in Vietnam plus Bangkok, shot to prominence locally when it was fined for staging a racy in-flight bikini dance in 2012 to celebrate the launch of flights to Vietnam’s popular tourist beach town of Nha Trang.

After two years of operation, it has cornered 25 per cent of the domestic market, taking customers from Vietnam Airlines and low-cost carrier Jetstar, according to state media.

“Competition in the market has sharply increased as VietJetAir has expanded their fleet and local routes,” Pham Viet Thanh, chairman of Vietnam Airlines’ management board, told the state-run news website VietnamNet this week.

Vietnam Airlines still had 61.4 per cent of the domestic market in 2013 — down 7.3 percent year-on-year, the website said.

The government has recently announced plans for a slew of privatisations of state-owned companies, including Vietnam Airlines but has not yet provided specific details or a clear timeline.

VietJetAir’s Airbus order — which will expand its fleet ten-fold — is central to the expansion plans of the fast-growing airline, which wants to launch routes to Seoul in South Korea and Siem Reap in Cambodia among other regional destinations.

But the company is a late entrant to the low-cost segment in Southeast Asia, behind Malaysia’s Air Asia, Lion Air of Indonesia, Singapore’s Tiger Airways and Jetstar of Australia — many of whom are also expanding their fleets.

“There’s something of a torrent of activity at the moment,” said Peter Harbison, executive chairman of consultancy firm CAPA-Centre for Aviation.

Fear of missing out on new markets in the rapidly-growing Asian aviation sector is “a large motivator with these very rapid expansions,” he said.

Because demand is growing and many of the aircraft ordered will not be delivered immediately “there is potential to absorb these but there is very much a rush at the moment,” Harbison said.

He said potential for growth in low-cost carriers in the region was “mind blowing … But that doesn’t mean everyone who buys a lot of aircraft is going to make money.”

VietJetAir’s letter of intent was for 14 of Airbus’ current single-aisle A320 model and 42 of the new A320Neo due to enter into service in 2015, which promises airlines considerably better fuel efficiency.

Another six planes will be the longer A321 version, which can be configured with up to 220 seats.

 

 

 

 

 

Source : Channel News Asia | January 29, 2014

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About thomasdinnocenzi

Thomas D'Innocenzi is a highly accomplished, results-focused senior international executive with extensive experience in global sourcing and market development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global sourcing operations worldwide. Extensive experience in international market development operations to accommodate rapid growth. Skilled in building top-performing teams, benchmarking performance, and restricting organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. As principal of Nova Advisors, LLC I’ve assembled an exemplary team that brings with them the knowledge and experience gained from starting up a Global Sourcing program with multiple Fortune 500 companies as well as the largest supplier network throughout the Asia-Pacific region. We have experience and expertise in more than a thousand medical and pharmaceutical products in manufacturing and sourcing at the best value. The right product, the right price point and the right branding fueled these successes that resulted in double-digit growth for top line sales and bottom line net margins for our customers. What sets us apart: • Our reach includes a large network of suppliers & manufacturers spanning 13 countries in Asia-Pacific region • We understand the manufacturing process and the business of the supplier and the buyer • Our company culture is based on quality assurance and our process is based on local quality control Our commitment is to be your partner offering the best products and services at the lowest cost. Contact me to discuss how we can make the global marketplace work for you. thomas@novaadvisors.com In addition, I am open to discussing opportunities in global sourcing, international marketing & sales, logistics and medical/pharma in Thailand, Vietnam, Malaysia, Philippines & Japan. Aside from my work I enjoy piano, astronomy, physics, and assisting my daughters with their studies. SPECIALTIES: Global Sourcing, Supply Chain Management, Business Development, Marketing, Logistics, Global Networking, Market Development, Healthcare Solutions, Pharmaceuticals, Medical Devices, Technology, Asia, Southeast Asia, US and Canada
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