Vietnam's VietJet agrees bumper $9 billion Airbus order

Reuters
France's Prime Minister Ayrault and Vietnam's Prime Minister Nguyen Tan Dung attend a protocol agreement signing ceremony at his Hotel Matignon offices in Paris
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France's Prime Minister Jean-Marc Ayrault (R Rear) and Vietnam's Prime Minister Nguyen Tan Dung (L Rear) …

By Nguyen Phuong Linh

PARIS/HANOI (Reuters) - Low-cost airline VietJet agreed a provisional order for up to 92 Airbus jets worth $9 billion (5.6 billion pounds) at list prices on Wednesday, stepping up expansion to make its mark in a fast-growing regional market.

Vietnam's first privately-owned airline said it would buy mostly A320 planes, financed by a planned stock market listing as well as loans from foreign banks backed by export credits.

The deal is the latest blockbuster order from Asia's budget carriers for Airbus or Boeing jets, as a huge surge in the number of middle-class travellers with disposable incomes pushes up industry traffic forecasts.

Wednesday's announcement in Paris confirmed a Reuters report on Tuesday.

Of the 92 jets, 62 are set to become firm orders with purchase rights - or options with undefined delivery dates - for a further 30. The airline plans to lease eight more planes.

The carrier aims for a stock market listing in either Hong Kong or Singapore in 2015 to fund expansion beyond Vietnam, managing director Luu Duc Khanh said.

"This deal is a milestone in our company, it means we are aiming to be a multinational budget airline," Khanh said in a telephone interview.

"Vietjet Air's purpose is expanding to the regional market, not only in the domestic market, so we need to be in the overseas market in order to call in more capital."

Vietjet, which has been flying since December 2011, has a fleet of nine jets including the country's first equipped with upward-slanting, fuel-saving "Sharklet" wingtips which it received in France on Tuesday. A tenth plane is due next week.

It is the only private airline in Vietnam that offers domestic and international flights. At present, its only overseas destination is Thailand's Bangkok.

BIG AMBITIONS

The plane order was part of an economic package signed during a visit to Paris by Vietnamese Prime Minister Nguyen Tan Dung, but only materialised after lengthy negotiations.

"We negotiated most of the night," Khanh, a former banker, told reporters.

When formalised, the deal will include firm orders for 42 A320neo, a fuel-saving version of Airbus's best-selling jet, as well as 14 current-generation A320s and six A321 aircraft.

The first two aircraft will be delivered in the last quarter of 2014 followed by five to 10 jets each year until 2022.

Airline industry experts say VietJet wants to follow the path of low-cost giants AirAsia of Malaysia and Lion Air of Indonesia, which have signed record plane orders.

Shares in Airbus parent EADS rose as much as 1.2 percent against a weaker European market following the VietJet deal, boosted also by $6 billion of orders in China where Airbus launched a new type of A330 tailor-made for regional growth.

Vietnam's national carrier Vietnam Airlines has also expressed interest in A380 superjumbos, industry sources said.

VietJet is talking to an airline in Myanmar about a possible joint venture similar to its agreement in June with Thailand's KanAir to form Thai VietJet Air early next year, Khanh said.

He would not say which of Myanmar's seven airlines the firm was looking to partner with.

Speaking to reporters in Paris, Khanh said VietJet was also interested in setting up the first low-cost services between Vietnam and North Asia including Taiwan - which has 100,000 Vietnamese residents - South Korea and Japan.

He said the airline would pursue a strategy of alliances to support its international growth and open up new markets.

Khanh said VietJet, owned in part by Sovico Holdings, had turned a profit in the first seven months of this year.

He said the airline, which was recently fined for organising an in-flight bikini contest, would continue to foster a "fun" brand combined with low prices and customer service. But he also pledged to maintain some of the industry's lowest unit costs.

"My background is in figures and numbers. I know that 1 percent here, 0.1 percent there, make a difference," he said.

(Additional reporting by Tim Hepher and Julien Ponthus in Paris, Jared Ferrie and Aung Hla Tun in Yangon; Writing by Martin Petty, Tim Hepher; Editing by David Cowell and Jane Merriman)

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