Vietnam Airlines set for partial privatisation in November

Vietnam Airlines said it will be partially privatised in November, part of a long-delayed drive to sell off the country's mostly inefficient state-owned enterprises.

Around 25 per cent of the national carrier will be sold in an Initial Public Offering (IPO), the company said in a statement released late Thursday (Sep 11). "Based on the equitisation plan approved by the Prime Minister, Vietnam Airlines will quickly implement steps to proceed with the IPO in late November 2014," it said.

Equitisation is the term Vietnam uses to refer to privatisation. State media reported that 20 per cent of the shares will be sold to strategic investors, some 3 per cent to airline staff and the rest to the public. The state will retain a 75 per cent controlling stake in the company, whose registered capital is roughly VND 14 trillion (US$661 million), the statement added.

Vietnam first began modest State-Owned Enterprise (SOE) reforms in the 1980s and there has been talk of privatising Vietnam Airlines since at least the mid-1990s. Prior attempts to sell off portions of the airline have been scuppered primarily by resistance from vested interests and a lack of political will. At least one prior attempt was abandoned due to the global economic crisis in 2008.

The overall process of SOE reform is mired in delays, experts say, as Vietnam's leaders must balance reducing inefficiencies in the SOE sector - which still account for some 35 per cent of Gross Domestic Product - with a general reluctance to cede control of key companies to foreigners.

Vietnam Airlines, a SkyTeam alliance member, remains the largest airline in the country, employing more than 10,000 people. It now owns more than 80 aircraft and will receive another 15 by the end of next year. SkyTeam is one of three major airline groupings, alongside Star Alliance and Oneworld. Other SkyTeam members include Air France, KLM, Alitalia and Delta.

In recent years Vietnam's flag carrier has faced stiff competition from low-cost VietJet Air, the country's first private airline which launched in 2011. VietJet has already cornered around 25 per cent of the domestic market - taking customers from Vietnam Airlines and rival low-cost carrier Jetstar, according to state media.

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Vietnam suspends crew after jet lands at wrong airport

Vietnam's aviation authority has suspended the crew of a plane operated by budget airline VietJet Air after a flight bound for the tourist hub of Da Lat landed at another airport more than 100 kilometres away.

The scheduled flight VJ 8575 carrying 200 passengers landed at Cam Ranh airport near the coastal city of Nha Trang -- another popular tourist destination -- on Thursday night, instead of the Central Highlands town of Da Lat around 130 kilometres (80 miles) to the southwest.

The incident occurred "because of the flight coordinators and crew members of VietJet Air, who did not correctly follow flight procedures", said the Civil Aviation Authority of Vietnam (CAAV) in an online statement.

The body said it decided "to temporarily suspend the licences" of the crew as well as other staff involved while an investigation was under way. It did not specify how many employees of the airline or airports involved had been suspended.

The CAAV also said that "appropriate measures" towards the airline would be taken at a later stage.

Passengers on the misdirected plane were transferred to another VietJet Air flight later on Thursday.

VietJet Air was not immediately available for comment.

The low-cost carrier, Vietnam's first private airline which launched in 2011, currently serves 11 cities in Vietnam plus Bangkok and Singapore.

It has already cornered around 25 per cent of the domestic market -- taking customers from Vietnam Airlines and low-cost carrier Jetstar, according to state media.

The airline 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 Nha Trang.

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Emerging Asian carriers make presence felt with plane deals

Emerging Asian carriers made their presence felt at a major airshow on Thursday with multibillion-dollar deals that underscored the region's importance as the growth driver of global aviation.

Four relatively small Asian carriers already had a combined order book of more than $11 billion halfway into the six-day Singapore Airshow, with smaller planes as their preference.

Airline executives said many smaller cities in Asia remain underserved despite the explosive growth in budget air travel, and they will use the new planes to connect such destinations to metropolitan centres.

Asia's expanding middle class is driving demand, said Song Seng Wun, regional economist with Malaysian bank CIMB.

"It's really a function of regional economies experiencing spending power of the rising middle class which benefited from so many years of steady growth," Song told AFP.

In the latest deal, Indian carrier Air Costa on Thursday ordered 50 E-Jets E2 aircraft, which can seat 70-130 passengers, from Brazilian manufacturer Embraer worth $2.94 billion.

The deal with Air Costa, which began operations only four months ago, also includes purchase rights for 50 more of the aircraft, both companies announced at the show.

With the orders, Air Costa will become the first customer of the E-Jet E2 in the Indian market when it takes delivery of the first plane in 2018.

Thai budget carrier Nok Air also on Thursday firmed up orders for two Q400 86-seater planes from Canada's Bombardier worth $63 million.

Nok Air indicated it may buy six more depending on its needs.

The Singapore Airshow began Tuesday with an order by Vietnamese budget carrier VietJetAir for 63 Airbus A320 jets worth $6.4 billion.

The deal also covered rights to acquire or lease 38 more A320s, potentially boosting VietJetAir's current fleet of 11 A320s tenfold.

The Vietnamese airline, founded only in 2011, plies domestic routes as well as services to Bangkok, Seoul and Kunming in China with its current fleet of leased planes.

In another deal, US aicraft maker Boeing on Wednesday announced that Nok Air had committed to buy 15 B737s worth $1.45 billion.

Bangkok Airways, which brands itself as a "boutique carrier" that flies to selected tourist destinations, on Wednesday also signed up to buy six 72-600s from European plane-maker ATR in a deal worth $150 million.

Air Costa executives said they would use the E-Jets E2 aircraft from Embraer to serve smaller Indian cities.

"Our focus has been the tier-two and tier-three cities in India," Air Costa chief financial officer Vivek Choudhary told a media briefing Thursday.

"Our philosophy is that we believe that 70 per cent of the population, of the huge 1.2 billion population in India, still reside in these non-metros," he added.

"Basically we are linking the metros to the smaller cities."

Choudhary said the carrier expects the air transport sector in India to grow dramatically in the next 15 to 20 years.

"The huge size of the middle class in India and the profitability levels that are going up adds to the demand in air travel," he added.

Nok Air chief executive Patee Sarasin said his airline was looking to expand into Myanmar following the opening up of the formerly army-ruled state.

"I think Myanmar has really stepped up," Patee told reporters after firming up the two jet orders with Bombardier.

"We think it's a beautiful country and we see a high potential that Myanmar will grow very fast," he said.

"I am sure within the next few years we are going to see Myanmar growing as fast as Vietnam."

Economist Song said such new markets were an "added bonus" as even without them demand for travel in Asia was robust.

"Frontier markets are an added bonus," he said. "Even without the likes of Myanmar, demand continues to grow."

Airbus, Boeing and Embraer -- in their 20-year forecasts for the industry -- all said the Asia Pacific is the key market to enter because of the burgeoning middle class.

Embraer's president and chief executive Paulo Cesar Silva said passenger traffic in the region "is mostly composed by secondary markets with low and medium demand densities of up to 300 passengers daily each way".

"Some 60 per cent of those markets are not served nonstop, and around half of all markets served do not allow for same day return travel," he said.

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VietJetAir nears huge Airbus order

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.

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