CEO Nguyen Thi Phuong Thao, who created the concept of bikini-clad flight attendants, told local media that she wants to make Vietjet become the “Emirates of Asia”.
Such goals are admirable, and insiders believe the IPO will bring further success to the “bikini airline”.
Taking off
After five years of operations, Vietjet has had a level success that other airlines would envy.
Vietnam’s only private airline ordered 100 new jets from Boeing in May last year, worth $11.3 billion, and signed a contract in September to purchase 20 A321 aircraft from Airbus, witnessed by State President Tran Dai Quang and French President François Hollande.
With the two contracts, it continues to drive towards its goal of having a “Red Revolution” in Vietnam’s aviation sector and becoming a global airline.
The five-year-old Vietjet surpassed national flag carrier Vietnam Airlines in domestic passenger transport during the recent Tet holidays, according to the Civil Aviation Authority of Vietnam (CAAV).
Over the six-day holiday, Vietnam Airlines carried 175,146 passengers and Vietjet 209,179, for market shares of 35 per cent and 42 per cent, respectively.
The only competitor of Vietjet Air is low-cost carrier Jetstar Pacific, a subsidiary of Vietnam Airlines. But Vietjet Air far outstrips Jetstar Pacific in revenue and market share.
While Vietnam Airlines, in which the State owns more 90 per cent, found it quite difficult to find strategic partners, Vietjet attracted 26 foreign investors after announcing its plan to conduct an IPO.
Vietjet has also closed the gap with Vietnam Airlines in terms of profit.
While Vietjet’s pre-tax profit increased 91.6 per cent in 2016 to VND2.3 trillion ($101.9 million), Vietnam Airlines’ pre-tax profit was VND2.5 trillion ($110 million), up 140 per cent and 7 per cent higher than the annual plan.
And its share price is much more attractive than Vietnam Airlines’.
According to the Hanoi Stock Exchange (HNX), Vietnam Airlines’ shares trade on the UPCoM Market with a reference price of VND28,000 ($1.2) and are expected to reach VND40,000 ($1.7).
Vietjet’s reference price, meanwhile, has been predicted to stand at VND90,000 ($4).
“The capital raised by Vietjet in the offering will help support the expansion of its international routes and the enlargement of its fleet, which are critical for it to compete in the Asian aviation market – one of the fastest growing and most dynamic aviation markets in the world,” said Mr. James Grandolfo, a Partner in the Hong Kong office of Milbank, which is the advisor in Vietjet’s IPO.
The appeal of Vietjet is its low cost, as budget airlines have become the key driver of Vietnam’s fast-growing aviation market and transported 55 per cent of domestic passengers in 2016.
Budget airlines are rapidly increasing their market share, with an annual growth rate of 15-20 per cent, according to Mr. Lai Xuan Thanh, Head of CAAV.
Given the strong development of low-cost airlines, Vietjet, the dominant player in Vietnam’s low-cost market, quickly captured a 40 per cent share of the local market and will likely surpass Vietnam Airlines within the next few years as Vietnam’s largest domestic carrier.
So who will benefit from Vietjet’s IPO? Obviously, it’s a win-win for Vietjet and its partners.
The economy, according to many economic experts, will also be a winner from the deal.
“A sizable capital source will be mobilized, in particular funds from foreign financial institutions,” said Mr. Nguyen Hoang Hai, Deputy Chairman of the Vietnam Association of Financial Investors.
“The IPO will be a test of how much foreign capital Vietjet can rally by promising continued expansion and rising profits, banking on the past few years of impressive growth that have turned it from a startup to a major carrier that is expected to soon hold the largest market share in Vietnam.”