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Vietnam Airlines is considering an order of 50 to 100 Boeing 737 Max planes this year to replace its aging fleet of Airbus SE single-aisle aircraft and may also buy long-range jets in preparation for flights to California.
The new aircraft will be for delivery between 2020 and 2030, Duong Tri Thanh, CEO of the state-owned carrier, said in an interview in Hanoi. While Thanh didn’t specify which Max model the carrier plans to buy, based on list prices of the popular Max 8, the order would be valued at about $6.1 billion to $12.2 billion before customary discounts.
“It will be an opportunity for Vietnam Airlines to invite competition between the aircraft manufacturers, mainly Airbus and Boeing,” Thanh said. “The final plan will be submitted to the government. We expect something to happen this year.”
The airline is seizing expanded travel demand presented by Vietnam’s growing economy and U.S. regulatory approval this month for its air-safety system, allowing carriers in the Southeast Asian country to fly to the U.S. The carrier is also considering a purchase of at least two wide-body planes — Boeing 777x or Airbus A350-1000 — to make its planned U.S. services commercially viable, Thanh said.
Vietnam Airlines intends to begin flying from the nation’s commercial center of Ho Chi Minh City to Los Angeles or San Francisco, both home to a large Vietnamese-American population, in 2020, Thanh said. Initially, the flights will include possible stops in Japan, Taiwan or South Korea before nonstop service begins in 2022, he said.
Given the distance and very tough competition, Vietnam Airlines expects to remain unprofitable on the Vietnam-California route for five to 10 years and will need government subsidies, Thanh said.
Vietnam Airlines also faces increased rivalry closer to home. Bamboo Airways became the nation’s newest airline to begin flying last month. The smaller carrier will sign a deal of about $3 billion to buy 10 Boeing planes during U.S. President Donald Trump’s visit to Hanoi this week ahead of his summit with North Korean leader Kim Jong Un, according to people familiar with the matter.
Vietnam Airlines, which trades on the Hanoi Stock Exchange’s Unlisted Public Company Market, is expected to move to a main-board listing on the Ho Chi Minh City Stock Exchange in early April after multiple delays, according to Thanh.
The government is looking to reduce its holding of the company to 51 percent from about 86 percent by selling shares at the end of 2019 and in 2020, he said. It’s also open to selling another stake in a private sale, following ANA Holdings’ purchase of an 8.8 percent stake in 2016.
Vietnam Airlines expects to serve 25 million passengers this year, 3 million more than in 2018, while revenue is projected to rise to 115 trillion dong ($5 billion) from 102 trillion dong, Thanh said.
©2019 Bloomberg L.P.
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