Vietnam Airlines to spend $3.8 billion on expanding fleet by 2025

The state-owned airline’s notice to shareholders says it will acquire 50 new narrow-body aircraft by buying or leasing them and 10 backup engines from 2021 onwards.

The number of aircraft could rise to 75 depending on market demand, the carrier said. It is considering a number of options, including the Airbus A320 family and the Boeing 737 MAX family.

The airline said large orders would give it an advantage in price negotiations and other post-purchase benefits such as technical maintenance, parts and advertisement.

The new aircraft are likely to contribute 40 percent of the airlines’ estimated pretax profit of VND3.6 trillion ($154.8 million) by 2025.

It plans to raise shareholders’ equity by 32 percent to VND29.4 trillion ($1.26 billion) by 2025 to keep the debt-to-equity ratio under 3.

Vietnam Airlines currently has a fleet of 61 narrow-body and 33 wide-body aircraft. Twenty-six of them will see their lease expiring or be sold by 2021.

Last year the airline carried 21.9 million passengers, or 44 percent of the total number on all Vietnamese carriers, according to the Civil Aviation Authority of Vietnam. It targets 13.7 percent growth this year.

Vietnam’s tourism boom means airlines are scrambling to invest in fleet expansion. Private airline Bamboo Airways wants to operate 40 aircraft this year, but the plan has hit a roadblock with Vietnam’s aviation authorities unsure of its management capabilities.

Budget carrier Vietjet in February signed a deal with Boeing to buy 100 new narrow-body 737 MAX airplanes for $12.7 billion.