VietNamNet Bridge – Airlines of Vietnam are making preparations to cash in on new opportunities of the open skies agreement as part of the ASEAN economic community in 2015.

Vietnam Airlines aircraft park at a local airport in this file photo. Vietnam's airlines are getting ready for the ASEAN open skies pact - Photo: Saigon Times archives

Fast aircraft fleet, flight expansion

HSBC Bank (Vietnam) Ltd. said in a statement that its representatives joined Vietnam Airlines’ official celebration Monday for arrival of two brand-new Airbus A321 aircraft in Hanoi as a result of a deal signed last November. Accordingly, the bank arranged a US$112-million loan with Deutsche Pfandbriefbank AG for the airline to purchase the aircraft.

The national flag carrier operates 83 modern planes for over 300 daily flights on 93 routes to 21 domestic and 29 international destinations but its aircraft fleet will expand significantly in the next two years. The SkyTeam Alliance-member plans to have 101 aircraft of different types, including Boeing B777, Airbus A330s and A321s by 2015, which is the year for scheduled establishment of the single aviation market in ASEAN.

The No. 2 airline in Vietnam, VietJetAir, is taking bold steps to add new aircraft to its fleet in an effort to stretch its wings in the ASEAN market and beyond. As envisaged in its development strategy, the private carrier will take delivery of six aircraft or more every year from 2014 in line with the pacts it clinched with Airbus and partners to buy and lease 100 planes of the A320 family.

Under the deal struck at the Singapore Airshow in mid-February this year, the airline confirmed orders for 42 A320neo, 14 A320ceo and seven A321ceo, plus 30 purchase options. The no-frills airline will also lease seven more A320 Family aircraft from a third party.

Luu Duc Khanh, managing director of VietJetAir, said these aircraft would be delivered later this year to support its fast network coverage in Vietnam and overseas.

At present, VietJetAir conducts nearly 600 weekly flights, using 11 Airbus A320s for 21 domestic and international routes. Next week, the three-year-old airline will commence a new route linking HCMC and the resort city of Dalat in the Central Highlands province of Lam Dong.

Besides Bangkok, VietJetAir also eyes Singapore, Malaysia, China, South Korea and Japan.

Jetstar Pacific, another low-cost carrier, is proceeding with its plan to have more planes in its fleet and to fly to more destinations, not only in Vietnam but also elsewhere in Asia. The carrier told the Daily that it was pressing ahead with the launch of outbound flights this year, hopefully right in the summer schedule.

Late last year, Le Hong Ha, CEO of Jetstar Pacific, unveiled the routes in the offing included Hanoi-Phu Quoc, Hanoi-Dalat, Hanoi-Can Tho as well as Hanoi-Bangkok, Hanoi-Hong Kong, HCMC-Singapore and HCMC-Bangkok.

Early this year, Jetstar Pacific received one new Airbus A320 and will get four more to make its fleet 10 this year in preparation for the new routes.

Heavy investment in efficiency

Of course, the single ASEAN aviation market will offer a chance for Vietnamese airlines to transport more passengers, but it will also pose fierce competition for them, as the major airlines active in this bloc include Singapore Airlines, Thai Airways and AirAsia. These foreign carriers now offer daily flights to and from Vietnam.

To deal with competition in the ASEAN market of over 600 million people, local airlines are investing heavily in new fuel-saving planes and aircraft of the same types to optimize efficiency of their operations.

Aviation experts calculate that fuel cost accounts for 40% or more of airlines’ operational bills. This is one of the reasons why Vietnam Airlines and VietJetAir are spending on fuel-saving engines to power their new aircraft.

At the Singapore Airshow, VietJetAir finalized a deal valued at over US$800 million at list price with CFM International to purchase CFM56-5B engines for 21AirbusA320ceo family aircraft.

In December last year, the airline signed an agreement with a consortium of General Electric (GE) & Snecma to equip its new Airbus A320s with fuel-saving engines. This deal was worth some US$800 million, comprising technical and maintenance services.

Also in 2013, GE clinched an estimated US$1.7 billion deal to sell engines with enhanced performance but less emission for Vietnam Airlines’ Boeing 787 aircraft. In addition to this latest commercial passenger aircraft of Boeing, Vietnam Airlines signed the contracts with Airbus in 2007 and 2009 to purchase in total of 26 Airbus A321 with reduced maintenance costs, noise emissions and fuel for delivery during the 2011-2015 period.

Commenting on the occasion of Vietnam Airlines’ delivery of the two new Airbus A321s, Sumit Dutta, CEO of HSBC Vietnam, said: “The arrival of two brand-new Airbus aircraft clearly strengthens Vietnam Airlines’ continued expansion as a world-class airline.”

Besides HSBC and Deutsche Pfandbriefbank AG, Vietnam Airlines also seeks support from other local and foreign partners to materialize its fleet expansion.

To have funding for expansion, VietJetAir plans initial public offering in Singapore or Hong Kong as well as work with partners in and outside Vietnam, including China Construction Bank (CCB) and its subsidiary CCB Financial Leasing Corporation Limited, and BNP Paribas.

Last year, both Vietnam Airlines and VietJetAir ran at a profit while Jetstar Pacific made endeavor to enhance its efficiency. The Civil Aviation Authority of Vietnam expects that the country’s growing aviation market coupled with stronger cooperation from the local tourism sector this year will serve as a springboard for those carriers to fly high in ASEAN’s open skies in 2015.

Source: SGT