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Plans in place

Released at: 05:52, 09/07/2014

Plans in place

Mr Nguyen Ngoc Minh, President and CEO of Vietnam Airlines, confirmed with VET's Minh Tien that the national flag carrier's equitisation is on schedule.

by Minh Tien

The equitisation plans for Vietnam Airlines are expected to be finalised and approved at the end of the second quarter. Do you believe this goal is feasible given the existing conditions?

I can confirm that the equitisation process is still being carried out in accordance with Vietnam Airlines’ schedule and it is anticipated that the domestic Initial Public Offering (IPO) will take place as planned.

Mr Nguyen Ngoc Minh, President and CEO of Vietnam Airlines

The carrier completed the business valuation stage and presented it to the Ministry of Transport (MoT) on February 28. The ministry then reported the results of the valuation to the Prime Minister. Both the Ministry of Planning and Investment (MPI) and the Ministry of Finance (MoF) have submitted written commentaries regarding the valuation results and an announcement plan to the Government Office.

The Government Office is now preparing a report to the Prime Minister for consideration and approval. It is expected that Vietnam Airlines will receive government approval of the business valuation results and that competent authorities will make a public announcement at the beginning of May.

Vietnam Airlines, together with the BIDV Securities Company (BSC), completed a status assessment in order to build the basic contents of the equitisation draft, including the organisational charter and operational norms. The carrier has also worked with Morgan Stanley and Citigroup and generated a set of criteria for selecting a strategic investor along with a draft of the selection process and a business information database, which will assist the search for and selection of strategic shareholders. We also cooperated on the search for a virtual dataroom service provider and legal consultancy regarding contract negotiations with any future strategic partners.

Within a month of the public announcement of the business valuation, Vietnam Airlines will complete the equitisation plan for approval by competent authorities and ultimately approval from the government at the end of the second quarter of this year. Under regulations, Vietnam Airlines will have three months to organise the sale of shares in accordance with the approved equitisation plan.

It plans to implement the domestic IPO within the third quarter this year. The task of selling shares to strategic investors will take place at the same time but efforts at deployment will be concentrated during the fourth quarter. From January 1, 2015, Vietnam Airlines will officially shift its operations to the joint stock company model.

What are the criteria Vietnam Airlines is looking to set for the selection of a foreign strategic investor?

We welcome all investors that have an interest in investing in the aviation sector, particularly in investing in Vietnam Airlines and our development policies. The important thing is that we find investors with the capabilities and financial resources required to contribute to the development of Vietnam Airlines in what is a competitive international environment, with new ideas and strategies that match the carrier’s core value positioning.

How would you assess the potential for the development of the domestic and international aviation market in the years to come?

Despite the fact that the International Air Transport Association (IATA) has lowered its profit forecasts for world aviation in 2014 due to rising fuel prices, which were triggered by fiscal policies in Venezuela, the crisis in Ukraine, and the impacts of the missing Malaysia Airlines aircraft, this year will still be the second year in succession that the aviation industry achieves promising business results and substantial profits. The reason for such an optimistic outlook is the recovering global economy and rising demand for freight carriage.

According to IATA’s forecasts, passenger demand in the Asia - Pacific region will continue to grow. Vietnam has been identified as the world’s third-largest emerging aviation market. At the same time the country continues to be a safe, well-invested, attractive destination for many international travellers. This should at least ensure similar growth to that seen in 2013. With positive signs of global and domestic economic recovery and with more and more people being able to afford air travel, demand in the domestic market will experience healthy growth rates of approximately 17 to 18 per cent over the next two or three years.

Despite increasing profits, Vietnam Airlines faces a declining market share. How do you view the rise of budget airlines not only in terms of market share but also their rapidly expanding aircraft fleets?

The aviation market is becoming increasingly open and so more vibrant, with the development of various carriers staking out both market and turnover share. Customers will the beneficiaries of the diverse choice in services and quality. This greater competition drives Vietnam Airlines forward in its operations and its growth. Competition will benefit all airlines in a similar fashion.

Vietnam Airlines currently holds a 67 per cent stake in Jetstar Pacific, maintaining its presence in the low-cost aviation segment while still focusing on the traditional full-service aviation market. This allows us to provide a diverse range of services and ticket prices to meet rising demand from travellers, from budget to high-end. Being the national flag carrier with a broad network of routes and services and as member of the Global SkyTeam Alliance, Vietnam Airlines has many opportunities to develop further and position its products and services to stand out in the competitive market.

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