Vietnam plans to offload stakes in top aviation firms by up to 30%

Vietnam plans to trim its stakes by around 30 per cent each in the top two businesses in the aviation industry – the Airports Corporation of Vietnam (ACV) and flag carrier Vietnam Airlines – by 2020.

A new schedule for divestment was approved last week, which will see the state truncating its holding in about 400 companies by 2020.

The Vietnamese government said, in last week’s announcement, that it will sell a 20 per cent stake at ACV in 2018 then go on with another 10.4 per cent sale in 2020 to finally own 65 per cent of the company.

French airfield operator Aeroports de Paris is in talks to purchase a slice of ACV, the operator of 22 airports in Vietnam. Earlier this year, local media reported that the Ministry of Transport had given an in principle approval to the French investor to be sole strategic shareholder with a 20 per cent share.

Among ground services and catering companies, ACV is the biggest beneficiary from the surge in travel, according to VinaCapital, which invested in the company’s IPO in late 2015.

The company floated its shares on UPCoM (the Unlisted Public Company Market) in November 2016. Its market cap is around $5.5 billion, which would rank it among the top five companies in the VN-Index if it moves to the main market.

While Vietnam is planning to build the Long Thanh International Airport, which would cost some $15 billion, ACV is unlikely to be in a position to finance the expansion itself, said VinaCapital in a commentary on the aviation industry. The future equity funding is expected to enable ACV to take on the additional development of  aviation infrastructure.

In Vietnam Airlines, which is also currently listed on UPCoM, the state plans to cut down its holding by 35.2 per cent to 51 per cent in 2019.

Vietnam Airlines has been dominating the local aviation market with its position as the national carrier. While it leads in international routes, it has lost its market share in domestic operations to low-cost carrier Vietjet, whose share price has risen 19 per cent since 28 February 2017 debut.

ACV has jumped more than 60 per cent since debut, while Vietnam Airlines has dropped nearly 37 per cent.

Last year, Vietnam Airlines sold an 8.8 per cent strategic stake to Japan’s ANA Holdings.

“Looking forward, the government may in principle raise the foreign ownership limit (in the aviation industry) to more than 30 per cent. (…) Air travel is still a young industry in Vietnam, and we expect solid growth for the foreseeable future,” VinaCapital commented.

Meanwhile, the new approved divestment scheme of the Vietnamese government commits a 24.9 per cent sell-down in largest petrol dealer Petrolimex next year. In total, the divestments are expected to bring VND64.46 trillion ($2.8 billion) to the country.

Vietnam will make separate announcements on the divestments from other state-controlled majors like Habeco and Sabeco, the government said late last week.

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