Vietnam Airlines needs foreign investment to expand and stay in the air. But as Etihad's non-alliance and investment strategy showed, foreign investment isn't a panacea.
Vietnam Airlines Corp. will offer more shares to foreign investors, including possibly another airline, as it prepares a listing on the Ho Chi Minh City Stock Exchange next year and the government plans to cut its holdings to 51 percent.
The carrier — which sold an 8.8 percent stake to ANA Holdings Inc. last year for $108 million — is discussing the sale of another 4.1 percent stake as early as this month with potential investors, Vietnam Airlines Chief Executive Officer Duong Tri Thanh said Thursday. Japan’s largest airline, which is limited by Japanese regulation to a 10 percent stake in Vietnam’s national carrier, may be interested in “other opportunities in our subsidiaries,” he said in a Bloomberg Television interview with Haslinda Amin.
“The share sales will enable Vietnam Airlines to continue implementing an ambitious investment plan of expanding and upgrading its fleet and improving overall service quality,” Thanh said in a separate interview during the Asia-Pacific Economic Cooperation CEO summit in Danang, Vietnam. The first batch of shares from the additional stake sale could be sold later this year or in 2018, he said. Interested investors could be another airline or financial institutions, Thanh said.
The state-owned airline, currently listed on Hanoi’s Unlisted Public Company Market — the so-called over-the-counter regulated market — plans to also list on the country’s benchmark stock exchange in Ho Chi Minh City next year, he said.
Shares of Vietnam Airlines fell 1.1 percent to 27,100 dong at the mid-day break in Hanoi trading.
Vietnam Airlines is expanding its fleet in an air-passenger market that the International Air Transport Association estimates will be among the world’s top five fastest-growing in the next 20 years. The government, which has said it will reduce its stake in Vietnam Airlines to 51 percent around 2019 to 2020, from about 86 percent now, is looking to strengthen tourism as a key industry to boost economic growth as the number of foreign visitors surges.
The carrier expects the number of international air passengers to Vietnam to be around 32 million in 2018, a 12 percent increase from this year, Thanh said. The airline forecasts that domestic travelers by air will rise 12 percent next year to 35 million, as economic growth makes travel affordable for more Vietnamese. The government forecasts Vietnam’s growth at 6.5 percent to 6.7 percent next year, among the fastest pace worldwide.
Vietnam Airlines projects its 2018 revenue will jump about 13 percent from this year, while profit before tax may be “at least” 1.6 trillion dong ($70 million), Thanh said in the interview. He predicted that the airline will see about 10 percent passenger growth next year from 22 million in 2017.
Vietnam Airlines has been transforming its fleet with the new widebody planes from Airbus SE and Boeing Co. and to fend off competition from VietJet Aviation Joint Stock Co., the nation’s largest private carrier. Vietnam Airlines signed a deal last year to buy 10 A350 wide-bodied aircraft with a list price of $3.1 billion. It also earlier ordered 19 Boeing Co. 787-9 Dreamliners.
It plans to have 110 aircraft by 2020 and 150 planes by 2030 from 92 planes now, according to Thanh.
The carrier is considering a route to Los Angeles by late 2019 or early 2020, he said. The U.S. Federal Aviation Administration is reviewing Vietnam’s aviation infrastructure to determine if it qualifies for a Category 1 rating, which will enable airlines from the country to fly to the U.S.
Tags: Vietnam Airlines
Photo credit: Vietnam Airlines will offer more shares to foreign investors, including possibly another airline. Pictured is a Vietnam Airlines jet in Hanoi. Nguyen Dieu Tu Uyen / Bloomberg