U.S. Markets close in 3 hrs 45 mins

Vietnam's VietJet agrees bumper $8.6 billion Airbus order, plans IPO

By Nguyen Phuong Linh

HANOI (Reuters) - Ambitious low-cost airline VietJet has agreed to buy up to 92 Airbus (PAR:EAD) jets worth about $8.6 billion between 2014 and 2022 in a move to beef up its presence in a fast-growing regional market.

The Vietnamese airline would buy mostly A320 planes using loans from foreign banks, managing director Luu Duc Khanh told Reuters in a telephone interview from France.

The deal is the latest blockbuster order from Asia's budget carriers for aircraft made by Airbus and U.S. rival Boeing (NYS:BA), highlighting a rapid shift towards air travel that prompted Airbus to raise its long-term industry forecasts on Tuesday.

Announcement of the agreement confirmed a Reuters report on Tuesday.

Of the 92 jets, 62 were firm orders offered at list prices during the eight-year period with a further 30 options to buy. The airline also planned to lease eight more planes.

The carrier would also aim for an initial public offering in either Hong Kong or Singapore in 2015 to fund expansion beyond Vietnam, Khanh said.

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

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


The first two aircraft would be delivered in the fourth quarter of 2014 followed by between five and 10 jets each year until 2022, Khanh said.

The agreement, part of a package of industrial contracts signed in front of the French and Vietnamese prime ministers in France on Wednesday, was finalised after last-minute negotiations as the airline said it needed more time.

Airline industry experts say VietJet has big ambitions and wants to follow the path of low-cost giants AirAsia (KLS:AIRASIA) of Malaysia and Lion Air of Indonesia, which also signed record orders.

Shares in the Franco-German parent of Airbus parent EADS (PAR:EAD) rose as much as 1.2 percent against a weaker market following the Vietnam deal and a raft of announcements from an exhibition in China.

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

Air Bagan was in discussion with VietJet about an "interline agreement" that would allow the carriers to sell each others' tickets, deputy managing director, Sao Thanda Noi told Reuters on Wednesday, but he said there was no plan for a joint venture.

Senior officials from Golden Myanmar Airlines, Air KBZ and its subsidiary, MyanmaMyanmar Airways, all said they were not in talks with VietJet when contacted by Reuters on Wednesday.

Both Airbus and Vietjet said the deal included firm orders for 42 A320neo, a fuel-saving version of its best-selling jet due to enter service from 2015, as well as 14 current-generation A320s and six A321 aircraft.

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