Vietnamese carriers sign $21 bn in aviation deals with US firms

Vietjet, Vietnam Airlines and Bamboo signed different business deals with US firms. (AFP/File)
Updated 27 February 2019

Vietnamese carriers sign $21 bn in aviation deals with US firms

  • The growing middleclass in Vietnam helped boost the aviation sector in the country
  • Three of the top Vietnamese airlines signed deals with Boeing and other US companies

HANOI: Vietnamese carriers signed $21 billion in aviation deals with US firms on Wednesday as US President Donald Trump met with top leaders in Hanoi ahead of his summit with North Korea’s Kim Jong Un.
Trump has urged Hanoi to narrow its gaping trade gap with Washington as part of his “America First” clarion call, urging Vietnam to buy more made-in-USA goods.
The communist country’s aviation sector has boomed in recent years thanks to a rapidly expanding middle class with growing appetites — and budgets — for air travel.
Three of Vietnam’s top airlines signed several deals for planes, engines and maintenance contracts on Wednesday as Trump met with the country’s top leaders in Hanoi ahead of his much-anticipated second summit with Kim later Wednesday.
Budget carrier Vietjet — famed for its bikini-clad air hostesses — signed an agreement for 100 Boeing 737 jets worth $12.7 billion, along with training and support contracts, the airline said.
“We are pleased to expand our partnership with Vietjet and to support their impressive growth with new, advanced airplanes,” Boeing CEO Kevin McAllister said in a statement from the airline.
A senior White House official said the budget carrier will also buy 215 engines made by CFM, a joint venture between America’s GE Aviation and France’s Safran Aircraft Engines.
Startup Vietnamese carrier Bamboo Airways, which made its inaugural flight only last month, will buy 10 787 Dreamliners from Boeing as it looks to grow its nascent fleet and expand its routes to international destinations.
“Vietnam and the US economic and trade relations have seen rapid expansion. Nonstop air routes between the two countries are of essence accordingly,” said Trinh Van Quyet, the chairman of FLC Group, the airline’s parent company.
Bamboo said Wednesday it wants to start flying to the US later this year or early in 2020.
There are currently no direct flights between Vietnam and the US, though the US Federal Aviation Administration has granted Vietnam a “category 1” ranking, paving the way for nonstop travel between the two countries.
Meanwhile state carrier Vietnam Airlines signed a $100 million maintenance contract with Sabre Corporation.
The bundle of deals was praised by the White House, which under Trump’s direction has also been urging its former wartime foe to buy more military equipment.
“These deals will support more than 83,000 American jobs and provide increased safety and reliability for Vietnamese international travelers,” a senior White House official said after the deals were signed.
Vietnam’s aviation sector has soared in recent years, with passenger numbers jumping from 25 million in 2012 to 62 million last year.
But growth is expected to start tailing off, analysts say, in the face of increasingly squeezed airport capacity and tough competition across the region, in particular from budget airlines such as AirAsia and TigerAir.
Wednesday’s aviation deals came ahead of Trump’s summit with Kim, with the leaders set to meet at the historical Metropole hotel.

Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

Updated 24 min 16 sec ago

Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

SINGAPORE: Cathay Pacific Airways has shelved plans for its first US dollar debt deal in 23 years, the airline said on Friday, after sources told Reuters that global investors had questioned the pricing due to civil unrest in Hong Kong.

The airline, the biggest corporate casualty of widespread anti-government protests in the Asian financial hub, on Friday lowered its second-half profit expectations, citing “incredibly challenging” conditions in its home market.

Cathay had started meeting investors in Hong Kong and Singapore on Sept. 24 after it mandated four banks to explore carrying out a US dollar denominated bond, according to a term sheet issued at the time, seen by Reuters.

It would have been the first US dollar debt deal for Cathay since 1996 and had been touted as a landmark transaction for the airline given all of its debt is denominated in Hong Kong dollars.

The issuance was to be unrated, and two sources with knowledge of the matter said that Cathay was willing to pay 200 basis points over the US Treasuries rate to secure three-year or five-year funding, with the size and term of the placement dependent on demand.



Cathay has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

However, investors demanded a higher price of at least 300 basis points over US Treasuries, which made the deal more expensive for Cathay, said the sources, who were not authorized to speak publicly about the matter. Cathay’s term sheet had said the transaction would be reliant on market conditions. A Cathay spokesman on Friday said the Hong Kong dollar private placement market was providing more funding opportunities and a debt issuance in that market was completed last month. “We will continue to monitor the US dollar bond market in future,” he said in a statement.

Dealogic data showed that Cathay raised $102 million in October and $64 million in May through Hong Kong dollar denominated deals.

The airline has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

Cathay had mandated Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank and HSBC to work on the shelved US dollar bond deal.