Vietnam and Myanmar Lead Southeast Asia Airline Surge

 - February 10, 2014, 5:30 AM
Sealing the deal for 10 Boeing 737s aircraft yesterday in Singapore were (left to right): Myanma Airways managing director Capt. Than Tun, Gecas president and CEO Norman Liu, Myanmar transport minister HE Nyan Htun Aung, U.S. Ambassador to Myanmar Derek Mitchell and Gecas executive v-p marketing Mike Jones.

Southeast Asian carriers VietJetAir and Myanmar Airways maintained the region’s strong growth-curve yesterday, announcing new airliner deals worth almost $7.4 billion. At the Singapore Airshow, Vietnam’s VietJetAir gave Airbus a $6.4 billion contract covering firm orders for 42 A320neos, 14 A320ceos and seven A321ceos. Earlier in the day, GE Capital Aviation Services (Gecas) and Myanmar state-owned flag carrier Myanmar Airways signed a $1 billion leasing agreement for 10 Boeing 737-800 and 737 Max models.

The VietJetAir deal includes purchase rights for another 30 airplanes and accompanies lease contracts covering seven more A320-family airplanes from third parties. It calls for delivery of the first current generation A320 this year and the first A320neo in 2018.

Nguyen Thi Phuong Thao, vice chairwoman and CEO of VietJetAir, and Airbus president Fabrice Brégier signed the final papers at the show yesterday. Dinh La Thang, Minister of Transport of Vietnam, and Le Luong Minh, Secretary General of ASEAN, witnessed the signing during ceremonies held in the show’s exhibit hall.

Myanmar Airways will take delivery of six Boeing 737NGs from Gecas, the commercial aircraft leasing and financing arm of GE, between 2015 and 2017; deliveries of four 737 Max 8s with CFM International Leap-1B engines will follow through 2020. The value of the aircraft is $960 million at list price. The transaction represents one of the largest investments by a U.S. company in Myanmar since the two countries reestablished diplomatic ties in 2012, said Norman Liu, Gecas president and CEO.

In business for a little more than two years, VietJetAir already has grown to command 26.2 percent of Vietnam’s domestic market share. It now flies 11 leased A320s on 16 domestic and four international routes. Registering average load factors of 90 percent, the airline recorded profits during its second year of operation.

“The A320 has proven to be extremely efficient in service with VietJetAir and is a favorite with our passengers,” said VietJetAir managing director Luu Duc Khanh. “Based on this experience, we look forward to developing our business across the Asia-Pacific region. Airbus will be our strategic partner and provide us with the most economic and comfortable aircraft and coordinate with VietJetAir in relevant training programs.”

Bregier referred to VietJetAir as one of the fastest growing airlines in the region and a rising star in the low-fare market segment, thanks largely to explosive traffic growth in Vietnam. Airbus projections call for at least 10 percent annual traffic growth in Vietnam over the next 20 years.

Going To Japan

Myanmar’s transport minister described the contract there, which was announced yesterday morning before the Singapore Airshow opened, as the largest such transaction in the country’s aviation history.

At Tuesday’s press conference Nyan Htun Aung, Myanmar union minister for transport, said Myanmar Airways will serve destinations in Japan with the 737s, enabling the carrier to “reenter the international market–with the support of our good friends, Gecas.” The airline initially leased two Embraer E190s from Gecas in 2012. The minister said international travel through Myanmar grew by 34 percent last year but domestic airlines are capturing only 10 percent of that traffic. “We need to increase that,” he said, describing the transaction as the largest in the country’s aviation history.

Joining the officials on the podium at Singapore’s Shangri-La Hotel was Derek Mitchell, the U.S. ambassador to Myanmar. The U.S. Senate confirmed Mitchell as ambassador in June 2012, sending the first ambassador to the former Burma in 22 years. The appointment “came because the relationship between our two countries has evolved…We have eased our sanctions [against Myanmar] and are engaged in an eager effort to renew our ties,” he said.

Also at the press conference, Win Swe Tun, deputy director-general of Myanmar’s Department of Civil Aviation, defended the country’s aviation safety record. Last summer, the civil aviation authorities of Indonesia and Myanmar grounded Merpati Nusantara Airlines’ and Myanmar Airways’ Chinese-made Xian MA60 turboprops for safety checks following a series of accidents. Win Swe Tun said Myanmar has instituted a safety management system for carriers and will continue to improve upon aviation safety. “We are a member state of ICAO and we take care of our passengers and our property,” he said.