Vietnam Airlines announces IPO

by CHIEF CORRESPONDENT, TOM BALLANTYNE  

September 1st 2014

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Vietnam Airlines president and chief executive, Pham Ngoc Minh, last month confirmed the airline would launch an initial public offering (IPO) in November, with the intention of raising US$70.8 million through the sale of a 5% equity in the government owned airline. Read More »

Pham Ngoc Minh, president and CE of Vietnam Airlines, hoping for a successful IPO and looking to sell another 20% of the carrier to global investors

Minh also told media attending a Hanoi conference last month that was organized by the International Air Transport Association and his airline that he is talking to several strategic investors, including “more than one” Japanese group, that are interested in buying a separate 20% holding in the flag carrier. He said Vietnam Airlines could sell more than one tranche of the company to investors but that the total could not exceed the 20% cap.

The airline has valued the IPO at $1.4 billion and expects to receive government approval for the sale this month. If the IPO is successful, it will reduce the government’s equity in the carrier to 75%. Minh said Hanoi plans to sell an additional 10% of the airline.

Analysts believe the IPO target is ambitious because investors are not satisfied with the transparency offered to them by state-owned companies. In the first three months of this year, only 25% of shares offered for state-owned companies were sold, the Wall Street Journal said.

“I believe transparency will play an important role in the IPO and a possible future listing. Vietnam Airlines has achieved transparency. The market will decide if the IPO will succeed,” Minh told the Wall Street Journal.

The airline will add 12 aircraft to its 80 strong fleet by year end in 2015, including leading edge A350s (4) and B787s (5), in anticipation of air traffic demand forecast to achieve double digit growth by 2020. Minh is faced with fierce competition from budget carriers operating regionally into Vietnam and from its local rival, Vietjet Air, as well as full service gulf carriers taking advantage of expanding tourist interest in the country.