Vietjet to finalize $6.5 billion Airbus order: sources
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Vietjet is set to finalize a $6.5 billion jet order with Airbus during a visit to Hanoi by French PM Edouard Philippe on Friday. The order for 50 A321neo jets is part of an aggressive investment in the Vietnamese fast-growing budget carrier Vietjet’s fleet that has provided lucrative business for both Europe’s Airbus and its U.S. rival Boeing.
It is also a boost for Airbus as it seeks to turn a raft of provisional orders put together at July’s Farnborough Airshow into hard revenues, narrowing a gap against Boeing this year.
The deal is the biggest economic component of an official visit to Vietnam by Philippe from Nov. 2-4, during which he will oversee deals with French firms and hold talks with Vietnamese counterpart Nguyen Xuan Phuc, people familiar with the matter said.
Airbus and Vietjet both declined to comment.
Vietnam and France also signed an agreement in September to expand defense collaboration, although details are scant.
VietJet CEO Nguyen Thi Phuong Thao said this week that Vietjet plans to maintain an average fleet age of just three years to keep fuel and maintenance costs low.
It placed provisional orders for the A321neo jets and 100 Boeing 737 MAX jets in Farnborough and has been negotiating to firm them up, with deliveries expected between 2020 and 2025.
The formal signing, to take place on Friday, will help to dispel doubts over the substance of deals announced in Farnborough, which was marked by a rash of vague or incomplete order announcements.
Finalizing such deals can involve tough negotiations as airlines try to squeeze out last-minute concessions.
“2-4, during which he will oversee deals with French firms and hold talks with Vietnamese counterpart Nguyen Xuan Phuc, people familiar with the matter said.”
However, finance industry sources have expressed concerns about a glut of orders in Southeast Asia from airlines like Vietjet, Malaysia’s AirAsia and Lion Air of Indonesia and question whether all of the several hundreds of planes on order from the Asian low-cost carriers will actually be delivered.
Vietjet told the Airline Economics conference in Hong Kong this week that low-cost airlines have a relatively low market position in Vietnam, and that those most successful in driving down unit costs would ride out any downturn in the market.
Vietnam’s expansion has also been peppered with trade sensitivities as Vietjet – which says it enjoys government support – juggled Airbus and Boeing procurements: a strategy also designed to win bigger discounts.
Two years ago, Boeing upstaged Airbus by clinching an order for 100 737s during a visit by then-U.S. President Barack Obama.
Until then, VietJet had only bought from Airbus, including an order for 92 jets in 2013.
Philippe’s visit is the latest example of Western leaders beating a path to Asia’s low-cost carriers, whose orders have secured thousands of manufacturing jobs, trade experts said.
Questions & Answers
Q.What is the purpose of French PM Edouard Philippe's visit to Vietnam?
What is the purpose of French PM Edouard Philippe's visit to Vietnam?
PM Philippe's visit is primarily to oversee deals with French firms and hold talks with his Vietnamese counterpart. The Vietjet deal represents the largest economic component of this official visit to Vietnam, which runs from November 2-4.
Q.Why does Vietjet plan to maintain a young fleet of aircraft?
Why does Vietjet plan to maintain a young fleet of aircraft?
Vietjet aims to keep an average fleet age of just three years. This strategy is intended to minimise operational costs, specifically by keeping fuel and maintenance expenses low, according to comments made by their CEO this week.
Q.When are the deliveries expected for the new A321neo and Boeing 737 MAX jets?
When are the deliveries expected for the new A321neo and Boeing 737 MAX jets?
Deliveries for the new A321neo and 100 Boeing 737 MAX jets are anticipated between 2020 and 2025. These planes were subject to provisional orders placed earlier in the year at Farnborough Airshow.
Q.What concerns have finance industry sources raised about aircraft orders in Southeast Asia?
What concerns have finance industry sources raised about aircraft orders in Southeast Asia?
Finance industry sources are concerned about a potential glut of orders from low-cost carriers like Vietjet, AirAsia, and Lion Air. They question whether all several hundred planes currently on order from these Asian airlines will actually be delivered.
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