Vietnam Airlines in share sales talks with foreign investors

[HANOI ] Vietnam Airlines Corp will offer more shares to foreign investors, including possibly another airline, as it prepares a listing on the Ho Chi Minh City Stock Exchange next year and the government plans to cut its holdings to 51 per cent.

The carrier - which sold an 8.8 per cent stake to ANA Holdings Inc last year for US$108 million - is discussing the sale of another 4.1 per cent stake as early as this month with potential investors, Vietnam Airlines chief executive officer Duong Tri Thanh said on Thursday.

Japan's largest airline, which is limited by Japanese regulation to a 10 per cent stake in Vietnam's national carrier, may be interested in "other opportunities in our subsidiaries", he said in a Bloomberg Television interview with Haslinda Amin.

"The share sales will enable Vietnam Airlines to continue implementing an ambitious investment plan of expanding and upgrading its fleet and improving overall service quality," Mr Thanh said during the Asia-Pacific Economic Cooperation (Apec) CEO summit in Danang, Vietnam.

The first batch of shares from the additional stake sale could be sold later this year or in 2018, he said. Interested investors could be another airline or financial institutions, Mr Thanh said.

The state-owned airline, listed on Hanoi's Unlisted Public Company Market - the so-called over-the-counter regulated market - plans to also list on the country's benchmark stock exchange in Ho Chi Minh City next year, he said.

Shares of Vietnam Airlines fell 1.1 per cent to 27,100 dong at the mid-day break in Hanoi trading.

Vietnam Airlines is expanding its fleet in an air-passenger market that the International Air Transport Association estimates will be among the world's top five fastest-growing in the next 20 years. The government, which has said it will reduce its stake in Vietnam Airlines to 51 per cent around 2019 to 2020, from about 86 per cent now, is looking to strengthen tourism as a key industry to boost economic growth as the number of foreign visitors surges.

The carrier expects the number of international air passengers to Vietnam to be around 32 million in 2018, a 12 per cent increase from this year, Mr Thanh said.

The airline forecasts that domestic travellers by air will rise 12 per cent next year to 35 million, as economic growth makes travel affordable for more Vietnamese. The government forecasts Vietnam's growth at 6.5 per cent to 6.7 per cent next year, among the fastest pace worldwide.

Vietnam Airlines projects its 2018 revenue will jump about 13 per cent from this year, while profit before tax may be "at least" 1.6 trillion dong (S$96 million), Mr Thanh said. He predicted that the airline will see about 10 per cent passenger growth next year from 22 million in 2017.

Vietnam Airlines has been transforming its fleet with the new widebody planes from Airbus SE and Boeing Co and to fend off competition from VietJet Aviation Joint Stock Co, the nation's largest private carrier. Vietnam Airlines signed a deal last year to buy 10 A350 wide-bodied aircraft with a list price of US$3.1 billion. It also earlier ordered 19 Boeing Co 787-9 Dreamliners.

It plans to have 110 aircraft by 2020 and 150 planes by 2030 from 92 planes now, according to Mr Thanh.

The carrier is considering a route to Los Angeles by late 2019 or early 2020, he said. The US Federal Aviation Administration is reviewing Vietnam's aviation infrastructure to determine if it qualifies for a Category 1 rating, which will enable airlines from the country to fly to the US.

BLOOMBERG