Little known airline startup from Vietnam Bamboo Airlines will buy 20 Dreamliner commercial jets from aerospace giant Boeing.
The company announced that the value for the deal would be up to $5.6 billion. a similar deal that is worth $3 billion has also been struck by the company with French Boeing competitor Airbus just a few weeks ago.
FLC Group which is a publicly traded resort development firm of Vietnam is the owner of the new airline.
Initially, the FLC aims to transport tourists to their resorts in the various parts of the country, said the company executives. But there is ought to be broader intentions because the 787 Dreamliners are wide-bodied airplanes which are best suited for the long-haul flights.
The airline has intentions to first expand to 16 domestic routes and 10 international routes said FLC chairman Trinh Van Quyet. The company first wants to start off with regional flights next year and later look to expand into the international market with flights to United States and Europe.
“The deal with Boeing today is only the first step for us. We want to have more than 100 planes in the future,” FLC Group chairman Trinh Van Quyet said.
Voung Dinh Hue, Vietnam’s deputy prime minister attendee the deal signing ceremony which took place at the U.S. Chamber of Commerce. Later an investor conference was held at the Trump International Hotel and a panel discussion on the future of the Vietnamese aviation industry.
Despite the Vietnam government having undertaken a number of reforms in recent time to make the country attractive to foreign investment, it is still officially a socialist country and it has it economy is largely state-controlled.
“Vietnam has great potential for aviation,” said Dang Tat Thang, Bamboo Airways’ newly appointed chief executive. “We chose the name Bamboo because we want to be the spirit of Vietnam.”
A substantial risk is being undertaken by the FLC Group in venturing into the airline industry in such a grand manner. It is highly unusual for the industry to place such huge orders without testing the market first even though startups in the industry is not unheard of.
“To purchase 20 787’s indicates a degree of confidence – some would say arrogance – and very deep financial pockets,” said Henry Harteveldt, a commercial aerospace analyst with Atmosphere Research. “It indicates a willingness to ignore basic financial planning for an airline, where you usually buy a few and wait for the market to materialize. It’s a very bold, very risky move.”
Skepticism about another airline being sustainable in the aviation market of Vietnam was expressed by Richard Aboulafia, an aerospace analyst with Teal Group. There are three airlines in the country currently that serve various parts of the country.
“You can lose an awful lot of money in the airline business. You’re putting all your eggs in one basket, and exposing yourself to an awful lot of expense and debt,” Aboulafia said. “But if you’re working in a controlled economy, it just might work out for you.
(Adapted from ChicagoTribune.com)