Monday, September 17, 2007

Vietnam has a hot aircraft market

Sky wars over Vietnam aircraft market

HANOI (AFP) — Aircraft giants Boeing and Airbus are competing to sell their new jetliners to Vietnam while Bombardier of Canada is also fighting for a slice of the fast-growing market.

Air travel is taking off in the communist-ruled country of 84 million where the economy is growing at over eight percent a year and a new middle class is taking to the skies for both tourism and business travel.

State-run Vietnam Airlines, soon to be part-privatised, plans to modernise its fleet of 45 aircraft -- a mix of Boeing, Airbus, ATR and Fokker planes -- to compete against a slew of foreign carriers and new budget airlines.

"We want to be one of the leading regional carriers," said Vietnam Airlines general manager for corporate affairs Bach Quoc Thang. "Singapore Airlines and Cathay Pacific are the examples we want to follow."

The airline is also considering turning subsidiary Vietnam Air Service Co. into a low-cost carrier, sources say, to take on Pacific Airlines, part-owned by Qantas, and AirAsia, now in partnership with ship-builder Vinashin.

Prime Minister Nguyen Tan Dung is expected to make a decision soon on buying new long-range jets for Vietnam Airlines, and lobbying has intensified for the big-ticket orders from US manufacturer Boeing and European rival Airbus.

Montreal-based Bombardier Aerospace has also joined the fray, taking its 90-seat CRJ900 NextGen jet, launched this year, to Vietnam last week, saying it could fly domestic and Asian routes at the lowest fuel cost per seat.

"This would be an ideal feeder aircraft for Vietnam's domestic and regional air transport needs," said Trung Ngo, vice president of Bombardier, adding that airlines such as Lufthansa and Air France have used their jets since the 1990s.

To secure financing for any new planes, Vietnam's first aircraft leasing company has just been set up by Vietnam Airlines, Vietindebank, Petrovietnam and telecom group VNPT, with initial capital of 200 million dollars.

Vietnam Airlines now operates 45 aircraft -- ten Boeing 777, ten Airbus A320, ten A321, three A330, ten French-made ATR-72 and two Fokker-70. It will receive five more A321 next year and four Boeing 787-8 Dreamliners from 2009.

It is also in negotiations to acquire as many as 14 to 16 more Boeing 787-8 or 787-9 jets on a lease/purchase basis while also talking with Airbus, subject to the government's final decision, industry sources say.

Some industry watchers had expected news of a major Boeing deal a year ago when US President George W. Bush visited Hanoi, or during Vietnamese President Nguyen Minh Triet's US trip in June, but no agreement was announced.

Former US ambassador Michael Marine last month again urged Vietnam to buy more Dreamliners, saying they would meet the airline's needs for direct US flights that, after repeated delays, are scheduled to start late next year.

Aviation officials will join Prime Minister Dung when he leaves later this month for a trip to both New York and Paris.

Nervousness about the hold-up on an anticipated Boeing deal has grown on the American side, more so since the new Airbus A380, the world's largest passenger plane, stopped off in Hanoi for a demonstration flight on September 2.

Edouard Ullmo, Airbus executive vice-president for Asia-Pacific, said during the visit that Vietnam Airlines was expanding so rapidly that it could be ready to operate a plane the size of the A380 by 2012-13.

Hanoi's American Chamber of Commerce executive director Adam Sitkoff said it was in Vietnam's best interest to quickly strike a deal with Boeing.

"The future growth of Vietnam's important tourism sector depends on having enough passenger aircraft," he said. "The longer Vietnam Airlines waits to purchase the Dreamliner, the longer it will be until the planes are delivered."

Vietnam Airlines executive vice president Nguyen Van Hung, speaking with AFP, gave little away about when a decision might be made.

"I think it will be soon since the government of Vietnam is now considering and studying the fleet development project of Vietnam Airlines," he said.

Vietnam would consider the 787-9 for its US flights, he said, but he added that "for our long-range operation, it is not only the Boeing 787-9 which can do it, but at Airbus they also have products, like the A350-900.

"It means that Vietnam Airlines has the right to select the appropriate aircraft for its fleet," he said. "But it's not Vietnam Airlines which makes the decision, it is Vietnam's government which makes the decision."