Vietnam's VietJet to Buy 100 Boeing Planes -- Update

By James Hookway in Hanoi and Gaurav Raghuvanshi in Singapore 

Vietnamese discount carrier VietJet Aviation JSC Monday signed a deal to buy 100 planes from Boeing Co. on the sidelines of U.S. President Barack Obama's visit to the country.

The order for Boeing's latest generation 737 MAX 200 jets is valued at $11.3 billion at list prices, though customers typically extract discounts of up to 30% on such large orders. Mr. Obama and Vietnamese President Tran Dai Quang witnessed the signing of the deal.

"Our investment in a fleet of B737 MAX 200 will accommodate our strategy of growing VietJet's coming international route network, including long-haul flights," VietJet Chief Executive Nguyen Thi Phuong Thao said.

VietJet said it would take delivery of the Boeing aircraft starting from 2019 and expand its fleet to more than 200 planes by 2023. VietJet currently flies 36 of Airbus Group SE's A320 jets.

VietJet has captured a 40% share in Vietnam's domestic aviation market--the fastest-growing in Asia last year--in just four years since its launch. The airline's passenger traffic grew 70% in 2015 and is expected to increase another 50% this year, overtaking flag carrier Vietnam Airlines as the biggest domestic carrier, according to consulting firm CAPA-Centre for Aviation.

VietJet's current fleet plans suggest that it will chase growth within Asia, focusing on Thailand, China and South Korea. The single-aisle A320 and Boeing 737 jets are best suited for flights of up to five hours, though the newer variants of the jets that the carrier has ordered can fly economically to cities like Tokyo and Brisbane, Australia from cities in Vietnam.

Separately, VietJet said it has signed a $3.04 billion engine supply and maintenance deal with Pratt & Whitney to power the Airbus A320NEO and A321NEO jets it ordered previously. VietJet ordered 63 Airbus jets at the Singapore Airshow in February 2014 and topped up with another 30 at the Dubai Airshow last year.

"It's a terrific opportunity for Boeing and other U.S. companies. Vietnam is the next big consumer-driven economy in Southeast Asia," said Mark Martin of Dubai-based aviation industry consulting firm Martin Consulting LLC.

VietJet has been planning an initial public offering of its shares later this year. The IPO, which was initially planned for the end of 2015, may raise as much as $800 million as the company seeks funds for its rapid growth.

Write to James Hookway at [e-mail] and Gaurav Raghuvanshi at [e-mail]

(END) Dow Jones Newswires

May 23, 2016 07:03 ET (11:03 GMT)

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