"If we are successful in expanding the network and strengthening our position, we'll be number two after Singapore Airlines," Chief Executive Officer Pham Ngoc Minh said at a briefing in Hanoi yesterday. The state-owned carrier may rank third by 2015, he said.

The carrier intends to add Airbus SAS A320neo and A350 aircraft, as well as Boeing Co. 787s, as it grows to 170 planes in order to tap rising domestic and long-haul travel. The airline's passenger traffic grew about 11 percent last year, Minh said, compared with a 5 percent gain for Malaysian Air and a 0.7 percent drop for Thai Air.

"Vietnam Air definitely holds its own," said Subhranshu Sekhar Das, a Singapore-based Asia director of aerospace and defense covering at Frost & Sullivan. "Still, Vietnam has a long way to go in developing the country's attractiveness as a tourist destination."

The country plans to add three new airports and upgrade other existing ones as part of plans to help boost tourist visits 75 percent to 10.5 million a year by 2020.

Vietnam Air Passengers

Vietnam Air flew 12.3 million passengers in 2010. It hasn't released 2011 numbers yet. Thai Air flew 18.4 million travellers last year, while Malaysian Air carried 13.3 million and Singapore Air (SILTPACA)'s main unit transported 16.9 million. The Singapore-based carrier is biggest in terms of passenger traffic, which measures how far paying customers flew.

"We have ambitions to be a regional network carrier," Minh said. The airline, which operates 73 planes, increased revenue 25 percent last year, he said.

Vietnam Air will postpone plans for an initial public offering until the second half of next year from this year because the "market is not yet attractive to investors," Minh said, without elaborating.

The carrier began flights to London Gatwick, the city's second airport, last year. Services are less than 60 percent full, compared with an average of 80 to 82 percent for other European flights, Minh said.

"Competition is fierce in the London market," he said. The airline has no plans to pare capacity, and it may add more flights next year if the market improves, he said.

Flights to Berlin, Amsterdam and Milan may also be added in the next couple of years, Minh said. The carrier, which already flies to Frankfurt and Paris, is a member of the SkyTeam alliance alongside Air France-KLM Group and Delta Air Lines Inc. (DAL)

Fleet Plans

Vietnam Air will receive 26 A321 planes by 2014 and it intends to order A320neo-family planes for deliveries after that, Nguyen Thi Thanh Van, a board member in charge of aircraft and fleet development, said at the briefing. The A320neo is a revamped version of the Airbus A320 that features new engines.

The carrier will also get 19 Boeing (BA) 787-9 Dreamliners and 14 Airbus A350s beginning in 2015, Van said. It will lease 11 of the 787s and four of the A350s, she said.

The airline's Cambodian affiliate, Cambodia Angkor Air, is also planning to boost flights to China, Vietnam and other Southeast Asian nations, Minh said.

Bloomberg - March 15, 2012