Vietjet Air, a leading Vietnamese airline, is listed on the Ho Chi Minh Stock Exchange under the ticker VJC. Established in 2007, VietJet is known for its low-cost business model.
In the first half of 2024, VJC’s revenue surged by 15.3 percent, and pre-tax profit saw a 433 percent increase. This growth was primarily fueled by the recovery of the domestic aviation market in Vietnam. Additionally, domestic ticket prices are regulated by the government in Vietnam, and a 5 percent increase in the maximum ticket price allowed, implemented on March 1, also contributed to the positive performance.
Moving forward, total demand for air passenger transport in 2024 is forecast to reach 84.2 million passengers, an increase of 15 percent compared to 2023. However, Vietnam’s aviation industry has been facing a shortage of aircraft due to a recall of Pratt & Whitney engines. VJC has had to temporarily ground 22 of its 85 aircraft for maintenance and repairs and this may last until 2025.
One potential solution for this shortage is to lease additional aircraft. However, leasing costs have jumped from around US$48,000 per month in 2019 to up to US$100,000 per month in 2024.
Furthermore, Vietnam’s airlines may face difficulty sourcing international financing after a lawsuit in the UK brought against Vietjet found in favour of the claimant. The dispute arose from Vietjet’s failure to make lease payments during the COVID-19 pandemic and then subsequent attempts to prevent the aircraft from being repossessed. The UK court went on to deny Vietjet’s request for relief from forfeiture but stopped short of determining damages.
Notably, this lawsuit saw the Aviation Working Group, a body that monitors the implementation of the Cape Town Convention on aviation leasing and scores countries by their level of compliance, add Vietnam to its watchlist back in April.
Disclosure: The author does not have any financial interest in VJC stock.