VietJet Air’s long rumoured order for up to 100 Airbus A320 aircraft was finally announced yesterday, setting up the low-cost carrier to mount a major attack on archrival Vietnam Airlines at home and on international routes.
Vietjet Air has only been flying since 2011. According to Flightglobal’s Ascend Online Fleets database, it operates just eight A320s. Although the average age of its aircraft is four years, all the aircraft have had previous operators and all are leased: one from CIT Leasing, three from ALAFCO, two from Sintas Ltd., and two from GECAS.
Yesterday’s order includes a tentative agreement to acquire 62 A320 aircraft and take purchase rights for 30 more. The deal covers 14 baseline A320s and six A321s, plus 42 re-engined A320neos.
In addition, it will lease eight A320s from third parties, likely to provide a short-term capacity bridge before the aircraft in yesterday’s order arrive in its fleet.
Prior to yesterday’s order, VietJet Air’s orderbook comprised a mere three aircraft, all to be leased from AWAS and delivered between now and the end of 2014.
VietJet Air has a broad array of options for where to deploy this massive influx of capacity, both domestically and internationally. Although it has emerged as an important rival of incumbent flag carrier Vietnam Airlines between the country’s three hubs: Hanoi; Ho Chi Minh City; and Da Nang, VietJet has yet to address several other key domestic markets.
VietJet route network, October 2013
According to FlightMaps Analytics, key domestic destinations it has yet to serve include Tuy Hoa, Qui Nhon, Hue, Chu Lai, and Dong Hoi. Overall, VietJet accounts for 19.8% of overall domestic capacity, well behind Vietnam Air’s 67%, but ahead of Jetstar Pacific’s 13.2%.
In addition, VietJet Air’s international network is virtually non-existent, restricted only to the Hanoi-Bangkok and Ho Chi Minh City-Bangkok routes. Key international destinations it is likely to pursue could include Singapore, Hong Kong, Seoul, and Kuala Lumpur.
Although Hanoi, Ho Chi Minh, and Da Nang dominate international traffic, the Civil Aviation Authority of Vietnam is pushing to attract international services to five recently-expanded airports: Phu Bai, which serves Hue; Cam Ranh; Lien Khuong, which serves Da Lat and the central Highlands; Phu Quoc, which serves Vietnam’s largest island; and Can Tho, which serves the Mekong Delta region.
Despite the potential of these airports, only Cam Ranh and Can Tho have international links. Vietnam Airlines operates scheduled services from Cam Ranh to Moscow, but its other international services are non-scheduled. Providing convenient international services to these secondary Vietnamese cities could be a powerful expansion tool for VietJet as its fleet grows.
Longer term, VietJet will also be able to deploy aircraft to its planned affiliates in Thailand and Myanmar. Nonetheless, its best opportunity for profitable growth lies at home, where it has an opportunity to establish itself as the low-cost option of choice against a full service incumbent, similar to AirAsia in Malaysia or Lion Air in Indonesia.