VietJet Aviation JSC plans to expand its fleet to include wide-body jets as the Vietnamese low-cost carrier considers California as its first U.S. destination starting about 2019.
Vietnam’s biggest private airline would use the larger aircraft to begin the route after the U.S. Federal Aviation Administration grants Vietnam airlines permission to fly to America, said Nguyen Thi Phuong Thao, VietJet’s founder and chief executive officer. The first flights could link the Southeast Asian nation with the Norman Y. Mineta San Jose International Airport, located near a large Vietnamese community, and would also be close enough to serve San Francisco, she said.
“We aim to expand international flights in the next few years” Thao said in an interview. “We want to make international flights 60 percent of our total flights. We are also studying the possibility of using widebody planes for long-haul flights when market conditions are favorable.”
VietJet, known for a publicity stunt involving bikini-clad flight attendants, is expanding rapidly as it goes head on with Vietnam Airlines Corp. for a larger slice of an air-passenger market that the International Air Transport Association estimates will be among the world’s five fastest-growing in the next 20 years. Vietnam Air CEO Duong Tri Thanh said this week the state-controlled carrier is considering a route to Los Angeles by late 2019 or early 2020.
VietJet — which currently operates only single-aisle planes — on Sunday signed a $600 million deal to acquire Pratt & Whitney engines to outfit 10 narrowbody jets during a ceremony with U.S. President Donald Trump in Hanoi. Trump visited the nation’s capital after attending the Asia-Pacific Economic Cooperation leaders’ meeting in Danang.
The latest deal is separate from a $3.6 billion contract signed earlier this year for 215 engines.
The budget airline’s international capacity has soared by more than 150 percent in the past year, said Brendan Sobie, a Singapore-based analyst at CAPA Centre for Aviation.
“The domestic market has had this great growth in the last five years, tripling in size, but there is a limit to that,” he said. “A lot of these people who have become first-time fliers in the last five years will be able to travel overseas as they build discretionary income.”
The carrier has ordered 230 Airbus SE and Boeing aircraft since 2014. VietJet and national carrier Vietnam Airlines each had a 42 percent share of the domestic aviation market last year, though VietJet’s 2017 share is probably less as it focuses on overseas expansion, Sobie said.
Last year, the budget carrier ordered 100 Boeing 737 Max 200 aircraft with a list price of $11.3 billion. It agreed to buy 30 A320neos valued at $3.6 billion in 2015, adding to an order for as many as 100 Airbus planes a year earlier. VietJet, which began operations in December of 2011, expects to serve 17 million passengers this year, after carrying about 15 million travelers last year.
The carrier expects its 2017 profit to rise 10 percent from its target for the year, according to Thao.
VietJet’s international expansion has focused entirely on Asia, with more than 400 weekly overseas flights scheduled by the end of this year, up from just 130 a year ago in October, Sobie said. Flying to the U.S. will be a much tougher challenge for VietJet as it goes up against entrenched carriers, Sobie said.
“The competition is very fierce,” Sobie said. “When you fly over 12 hours, it becomes more expensive. There are huge costs initially. The prospect of making money on this route is bleak.se.”
VietJet will be able to differentiate its service to offset those headwinds, such as offering service to regional airports in San Jose and Orange County, California, which also has a large Vietnamese population, Thao said.
“We are looking at airports where there is a demand but not many airlines flying there,” she said.
©2017 Bloomberg L.P.