Vietnam’s budget airline VietJet was said to raise from $200 million to $300 million from issuing corporate bonds to finance the purchase of $9 billion aircrafts and expanding its maintenance units, according to an international news report.
In an interaction with Bloomberg, VietJet’s CEO Luu Duc Khanh revealed that the plan would start as early as the second quarter of this year. It is undecided whether the bonds will be sold on the domestic or international market.
Khanh said his company would choose an international consultant agency next month for both the bond issuance and the expected initial public offering (IPO).
However, a an executive aware of the development told DEALSTREETASIA that the proceeds from the corporate bond issuance were expected to be much more than the quoted $300 million figure.
Meanwhile, VietJet was not available for comment.
VietJet plans to buy 100 A320 aircrafts from Airbus SAS, which are priced at over $9 billion.
“A cheap ticket doesn’t mean poor service,” Khanh told Bloomberg as emphasizing the perception that a low-cost airline means low quality.
At a company’s meeting on Sunday in HCM City, Vietjet had announced that 2014 was the second year of profit, but did not disclose the value. The revenue in the year reached VND8.1 trillion ($380.3 million), and VietJet expects to hit a revenue of VND13.8 trillion ($647.9 million) this year.
The Hanoi-based carrier set up VietJet Cargo Co two months ago and will lease two cargo planes this year to meet rising domestic demand, according to the CEO. Air cargo transport rose 18 per cent to 905,000 tonnes of goods in Vietnam in 2014, he reportedly said.
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Previously, DEALSTREETASIA reported that VietJet aimed to raise about $800 million from IPO by the end of this year.
“It’s a good time for us to sell bonds as borrowing costs are now reasonable in the international markets, and Vietnam’s credit rating has improved,” Bloomberg quoted Khanh.
VietJet transported six million passengers last year, seeing a two-fold from 2013. It expects passengers will rise as much as 70 per cent in 2015 with new routes to South Korea, Japan, Malaysia and China. Khanh also said that VietJet’s domestic market share increased to 35 per cent last year.
First flights to Russia were delayed in May due to the falling rouble, but VietJet will resume flights to Russia in November.
The flyer targets of VietJet are first-time flyers and young professionals who would “otherwise travel to domestic destinations by car or train”, said Khanh. At least 30 per cent of passengers are first-time flyers, he said.
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