ANA To Buy 8.8 Pct Stake In Vietnam Airlines

January 12, 2016

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ANA said it plans to buy an 8.8 percent stake in state-controlled Vietnam Airlines for USD$108 million, becoming its main strategic partner.

The deal helps satisfy ANA's ambitions to expand in fast-growing regional markets after it backed out of a 2013 deal to buy a 49 percent stake in Myanmar's Asian Wings Airways for USD$25 million due to concerns over excessive competition in the country.

Vietnam's flag carrier in turn gains a long-sought partner and funds to help it boost operational and management know-how. Although it completed an IPO in 2014, raising USD$51 million by selling 3.5 percent of the company, it has yet to list as its return on equity is still far below the 5 percent level required by law.

Vietnam Airlines, which hopes to lift pre-tax profit by 64 percent to VND2.3 trillion dong (USD$103 million) this year, competes with domestic low-cost carrier Vietjet, as well as other full-service carriers such as Thai Airways and Singapore Airlines.

The carrier commands about half of the domestic market while two affiliates have another combined 15 percent share.

It has a 70 percent stake in Vietnamese low-cost carrier Jetstar Pacific, with Australia's Qantas holding the rest. Its other domestic affiliate is Vietnam Air Service and it also owns 49 percent of Cambodia Angkor Air, a joint venture with the Cambodian government.

The carrier has taken delivery of four Airbus A350s and five Boeing 787s, and plans to take more of both types of aircraft to expand its international medium and long-haul network and increase services to points in Europe, Asia, and Australia.

The deal, which will see one ANA executive on Vietnam Airlines' board, also raises questions about the viability of the Vietnamese carrier's existing code-share deal with ANA rival Japan Airlines.