Vietnam Airlines expanding amid competition

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Vietnam Airlines is doubling its fleet as it prepares for partial privatisation

Vietnam Airlines is planning a major expansion of its long-haul fleet as it faces new competition in its home market from short-haul carriers.

The state-owned airline has been expanding its long-haul fleet with Boeing 777-200ERs and already had four Boeing 787s on order for delivery in 2009 and 2010. In early October it signed a memorandum of understanding with Boeing for 12 more 787s for delivery from 2015. The carrier says it hopes to have a fleet of 28 787s by 2020.

Vietnam Airlines at the same time signed an MoU with Airbus to acquire 10 A350-900s for delivery from 2014. In addition, together with a new state-owned leasing company, it has signed an MoU for 20 Airbus A321s for delivery from 2012.

The carrier also indicates it plans to order more A350s in future, giving it a fleet of 24 of the type by 2020. By 2020 it also expects to be operating 50 A320-family aircraft, compared to the current 20. Vietnam Airlines currently operates 45 aircraft and plans call for it to be operating 86 by 2015 and 110 by 2020.

Widebodies are to be operated primarily on new long-haul routes to Europe and the USA. It plans to launch US services late next year with 777-200ER flights between Ho Chi Minh City and Los Angeles.

The orders come ahead of plans for the carrier to be part-privatised through an initial public offering in the near future. They also come as it is facing much more competition at home from new carriers, as the government relaxes restrictions on airline operations.

Vietnam's air transport market has been growing rapidly but until now has been dominated by Vietnam Airlines and much smaller Pacific Airlines. Australia's Qantas Airways recently acquired 18% of Pacific and plans to increase this to 30%. It is helping the carrier transform its operations to follow the low-cost model.

Malaysian low-cost airline group AirAsia also recently signed an agreement with Vietnam's state-owned shipbuilding company Vinashin to set up a new low-cost carrier in the country. In addition, the Civil Aviation Administration of Vietnam is assessing an application from a group of Vietnamese investors seeking to establish a new airline called Vietjet that aims to operate narrowbody aircraft.

The government has meanwhile embarked on a major airport upgrade programme to support the rapid growth in the market. To help pay for many of the new aircraft on order for the state-owned airlines it has established a national leasing company owned by Vietnam Airlines and three other state-owned firms.