VietJet Expands Fleet with $7.4 Billion Airbus Deal as Southeast Asia’s Aviation Market Rebounds
Vietnamese budget airline VietJet has announced the acquisition of 20 Airbus A330 widebody aircraft, marking a $7.4 billion deal aimed at expanding its fleet and increasing capacity. The airline’s move aligns with the growing demand for air travel across Vietnam and the broader Southeast Asia region, signaling a strong recovery from the pandemic’s impact on the aviation industry.
This expansion mirrors similar actions by other regional airlines. For instance, Cebu Pacific, a low-cost airline from the Philippines, recently signed a preliminary deal to acquire up to 152 Airbus aircraft, valued at around $24 billion. These developments highlight the broader trend of increasing investments in aviation as more consumers gain purchasing power and seek affordable air travel options.
VietJet’s current fleet primarily consists of narrowbody Airbus A320 family aircraft, which cater to shorter domestic and regional routes. The newly acquired A330s, capable of carrying more passengers over longer distances, represent a shift in strategy, indicating that VietJet is likely planning to expand its international routes or optimize high-demand domestic flights. This fleet upgrade is essential as the airline strives to improve operational efficiency amid rising demand for air travel.
The airline’s passenger numbers already surpassed pre-pandemic levels, with 25.3 million passengers recorded in 2023 compared to 23.7 million in 2019. VietJet has set a target of 27.4 million passengers for 2024, reflecting its continued growth trajectory. The airline’s fleet currently consists of around 87 planes, operating at 85% capacity. To meet the increasing demand, this fleet expansion is crucial.
VietJet’s recovery from the pandemic has been significantly more robust than that of its primary competitor, Vietnam Airlines. In 2023, VietJet carried 1.2 million more passengers than the state-owned flag carrier and has returned to profitability faster. VietJet posted a net income of 230 billion dong ($9.3 million) in 2023, recovering from a loss in 2022, whereas Vietnam Airlines suffered a significant loss of around 5.6 trillion dong ($227 million) the same year.
Part of VietJet’s rapid recovery is attributed to its cargo business expansion, which bolstered the airline’s financial position. The decision to purchase, rather than lease, its new aircraft also reflects VietJet’s long-term strategy for value creation. Owning planes allows airlines to have greater control over their operations and reduces vulnerability to external shocks that could affect cash flow, a crucial factor for sustaining growth in a competitive market.
The airline’s continued success can also be viewed in the broader context of Vietnam’s economy, which remains heavily state-controlled. Founded in 2011 and majority-owned by billionaire Nguyen Thi Phuong Thao, VietJet stands out as one of the few private enterprises that have thrived in an environment dominated by state-owned companies like Vietnam Airlines. The airline’s rapid recovery, coupled with its bold expansion plans, underscores the potential for private businesses to succeed in Vietnam’s evolving economic landscape.
As the only major private airline in Vietnam, VietJet’s performance in the post-pandemic era has shown resilience, gaining market share while its competitors continue to face financial difficulties. This demonstrates the airline’s confidence in the strength of the domestic and regional airline market. Moreover, the significant fleet expansion is a strong indicator that the airline industry in Southeast Asia is on the path to full recovery from the pandemic’s lingering effects.
[SOURCE :THE DIPLOMAT]
