VietJetAir has officially signed a letter of intent with Airbus to purchase 62 A320 medium-haul aircraft worth $6.1 billion (4.5 billion euros) at list prices as the low-cost carrier starts expanding beyond Vietnam.
The memorandum of understanding was signed by the managing director of the Vietnamese airline, Luu Duc Khanh, during a ceremony in Paris attended by the French and Vietnamese prime ministers.
Khanh told the press that the first airplane would be delivered next year, and the last one by 2022. “That is nearly ten aircraft a year”, he pointed out.
The airline just took delivery of a ninth leased A320.
The order is for 14 of the 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.
VietJetAir will lease eight more A320 from third party lessors and the deal includes options for another 30 aircraft, both companies said in a joint statement.
Airbus’s executive vice-president for Asia, Jean-Francois Laval, said the whole deal was worth $9.1 billion at list prices.
VietJetAir began operating in late 2011 and is the first private airline in Vietnam to operate domestic and international flights. It currently serves 11 cities in Vietnam plus the Thai capital Bangkok.
Singapore-based aviation analyst Brendan Sobie said the airline already has a fifth of the Vietnamese market and should attain a quarter by the end of this year.
“They have established a good foothold on the Vietnamese market, it’s time for them to expand internationally,” Sobie, chief analyst at CAPA Centre for Aviation, told AFP.
VietJetAir’s Khanh said his company would open a new route to South Korea by the end of the year, and was looking at expanding to northern Asian destinations like Japan and Taiwan.
“We want to be the first low-cost carrier to fly to those countries,” he said.
Taiwan is the richest foreign investor in Vietnam, and there are currently 200,000 Taiwanese businessmen living in Vietnam and 100,000 Vietnamese wifes living in Taiwan, said Khanh.
Mr Sobie noted however that VietJetAir is now the fifth airline to enter the low-cost segment in South East Asia, behind Malaysia’s Air Asia, Lion Air of Indonesia, Singapore’s Tiger Airways and JetStar of Australia.
“They’re going to have to do some work to build up the brand,” he said