A forthcoming aircraft procurement endeavor may soon grace the horizon, as Vietnam Airlines contemplates finalizing an initial accord for the acquisition of approximately 50 Boeing 737 MAX 8 aircraft, representing an estimated total value of approximately $10 billion. This pivotal purchase agreement is poised for confirmation during the impending visit of United States President Joe Biden to Vietnam, an occasion during which the Memorandum of Understanding is anticipated to be executed.
The narrative of Vietnam Airlines’ deliberations traces back to 2019 when the Vietnamese Ministry of Transport sought further elucidation from the national carrier regarding its intentions to secure 50 narrowbody aircraft by the year 2025. Vietnam Airlines, beset by financial challenges, found itself at a crossroads, deliberating between embracing the Airbus A320neo family or the Boeing 737 MAX 8 series. The initial blueprint contemplated the procurement of said aircraft anytime between 2019 and 2022, with a view to their operational deployment by 2025.
These prospective additions to the airline’s fleet were earmarked to supplant 26 of its extant narrowbody aircraft while simultaneously augmenting the fleet by no less than 24 units. This augmentation was envisioned to transpire at a pace of approximately four to five aircraft per annum.
However, the Ministry of Transport expressed dissatisfaction with the absence of concrete plans delineating the future routes upon which these aircraft would be deployed. Additionally, the carrier was found wanting in terms of a comprehensive strategy for workforce expansion.
Furthermore, the Transport Ministry proffered counsel against the acquisition of the 737 MAX, citing concerns stemming from the lingering uncertainty surrounding the lifting of the aircraft type’s grounding. Vietnam Airlines was also admonished regarding the technical issues associated with the Pratt & Whitney engines employed on the Airbus A320neo and A321neo aircraft.
Before a definitive course of action could be determined, the aviation industry was irrevocably disrupted by the onset of the global pandemic, further exacerbating the airline’s financial predicament.
In light of the aforementioned exigencies, compounded by the urgency of pre-pandemic plans, Vietnam Airlines, situated in a landscape where the country emerged as the world’s fifth fastest-growing aviation market, finds itself confronted with a compelling imperative to rejuvenate and modernize its fleet. This imperative is underscored by the risk of ceding market share to other domestic carriers, such as Bamboo Airways and Vietjet.
It appears that a discernible course of action may already have been charted. Allegedly inclined towards the acquisition of Boeing’s 737 MAX 8 series, Vietnam Airlines is poised to consummate a tentative purchase agreement concurrently with President Biden’s visit to Hanoi, Vietnam. This strategic move is anticipated to strengthen bilateral ties.
While the prospective acquisition of 50 aircraft is projected to command a valuation ranging from $7 billion to $10 billion at list prices, the national carrier is poised to benefit from substantial discounts, owing to the scale of its procurement. In addition, Boeing may extend further concessions, given that this order from Vietnam Airlines represents a noteworthy triumph for the U.S. aircraft manufacturer, particularly in light of the carrier’s current status as an exclusive operator of Airbus single-aisle aircraft, consisting of A321-200s and A321neos.
In conclusion, the prospect of a new aircraft order, whether in its embryonic stages or on the cusp of realization, is invariably met with anticipation and enthusiasm. However, it is imperative to scrutinize the mechanics underpinning the financial underwriting of such a substantial endeavor. As of the second quarter of this year, Vietnam Airlines continued to grapple with financial challenges, thereby rendering the allocation of substantial capital for the acquisition of 50 new aircraft a seemingly improbable endeavor. In this context, a sale-and-leaseback arrangement emerges as a plausible financial stratagem.
At the time of composing this discourse, neither the airline nor Boeing have issued a formal response to inquiries. Nevertheless, it is sanguinely hoped that Vietnam Airlines shall successfully navigate its financial considerations, recognizing the imperative nature of these 50 prospective aircraft to facilitate capacity augmentation and route expansion, thereby reinforcing its standing within the Vietnamese aviation landscape.
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SOURCE: http://simpelflying.com
