Vietnam, China airlines in $15.45bn Airbus orders

France’s Prime Minister Jean-Marc Ayrault (right) shows Vietnam’s Prime Minister Nguyen Tan Dung where to sign during a protocol agreement signing ceremony, where nine contracts were signed, at his office in Paris yesterday. Vietnamese low-cost airline VietJet has agreed to buy 92 jets worth up to $8.6bn from Airbus between 2014 and 2022, its managing director said yesterday.

Reuters, AFP/Hanoi/Beijing

Ambitious low-cost airline VietJet has agreed to buy up to 92 Airbus jets worth about $8.6bn between 2014 and 2022 in a move to beef up its presence in a fast-growing regional market.

The Vietnamese airline will buy mostly A320 planes using loans from foreign banks, managing director Luu Duc Khanh said.

Meanwhile, three Chinese companies have ordered a total of 68 A320 aircraft, Airbus said yesterday as it also announced a lighter version of a wide-bodied jet aimed at emerging markets.

In deals worth more than $6.75bn at list prices, the aircraft-leasing firm BOC Aviation ordered 25 planes, Qingdao Airlines requested 23 planes and Zhejiang Loong Airlines sought 20.

The Vietnam deal is the latest blockbuster order from Asia’s budget carriers for aircraft made by Airbus and US rival Boeing , highlighting a rapid shift towards air travel that prompted Airbus to raise its long-term industry forecasts 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 multi-national budget airline,” 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 will 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 of Malaysia and Lion Air of Indonesia, which also signed record orders.

Shares in the Franco-German parent of Airbus parent Eads rose as much as 1.2% 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 said yesterday, but he said there was no plan for a joint venture.

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.

Air travel is rising steadily in Asia and other emerging markets, with passenger trips in China reaching 320mn in 2012, up 9% from the year before.

Airbus announced the Chinese orders in statements on the sidelines of an air show in Beijing.

The orders marked a “vote of confidence in the long-term appeal of our popular A320 family”, John Leahy, Airbus’s chief operating officer for customers, said in a statement.

Separately, Airbus announced a new lighter version of its A330-300 wide-body jet which it said was aimed at high-growth markets.

“The new lower-weight A330-300 variant specially designed for regional and domestic use is Airbus’ solution for markets with large populations and fast-growing, concentrated air traffic flows,” Fabrice Bregier, Airbus president and CEO, said in a statement.

Bregier, visiting China for the air show, said the announcement was being made in the country “because here we see strong pent-up demand for efficient and reliable wide-body aircraft connecting mega cities such as Beijing, Shanghai, Chengdu and Guangzhou”.

Airbus said the increased fuel efficiency from the lighter weight of about 200 tonnes “will result in an overall cost reduction by up to 15% compared with today’s long-range A330-300 variants”.

Speaking to AFP, Bregier said: “It is a solution for regional flights lasting two to three hours, a plane whose cost per seat is equal to that of the A320 but which supports twice as many passengers.”

Eric Chen, president of Airbus China, said the company plans to deliver the first of the new A330-300 aircraft by the end of 2015 or early 2016.

“The Chinese market has special features: concentrated airports and a large population,” he added. “That’s why we think this aircraft will be a popular solution to these challenges.”

BOC Aviation’s order for A320s includes 12 A320neos, which are designed to cut emissions and fuel consumption, while Qingdao Airlines’ includes 18 neos and Zhejiang Loong Airlines’ has nine.

The two latter carriers are both start-up airlines. Qingdao Airlines will begin operations next year and take delivery of the first A320s in 2016, the statement said. Zhejiang Loong will begin business this year.

Singapore-based BOC Aviation is the aircraft-leasing arm of the major state-owned Bank of China. Airbus A320s make up a core part of its fleet.

A BOC spokeswoman in Singapore said the list price for the 25 planes it ordered is $2.6bn.

The list prices for the orders from Qingdao Airlines and Zhejiang Loong Airlines amounted to more than $4.15bn, according to Dow Jones Newswires.

BOC Aviation had ordered another 50 A320s in January, half of them from the “neo” series, with delivery to begin next year and continue through 2019.

Air China also ordered 100 A320s in May, due to be handed over between 2014 and 2020.

Airbus has a factory in China that assembles A320-series planes.

The company predicted in its annual industry forecast on Tuesday that the Asia-Pacific would overtake Europe and North America in air traffic by 2032.

With overall growth rising 4.7% a year, the world would need another 29,000 new commercial aircraft over the next two decades, it said.

By then two-thirds of people in emerging markets would take a flight each year, compared to one in five now, Leahy said.