Jan. 30 (Bloomberg) -- VietJet Aviation Joint-Stock Co., the budget carrier that began flights in Vietnam last month, may double its fleet to six planes by the end of the year as it lures passengers from bus trips taking as long as 40 hours.
The carrier's 122-seat Airbus SAS A320s are 90 percent full on its first route, Ho Chi Minh City-Hanoi, said Chief Operating Officer Pritam Singh. The average fare including taxes is 1.03 million dong ($49) one way, according to the airline. That's about 25 percent less than the cheapest ticket offered on Vietnam Airlines' website.
VietJet also intends to challenge the state-owned carrier on international services as soon as the third quarter as an economic growth rate that the government expects to reach 6 percent this year spurs travel demand. The number of Vietnamese living in poverty declined to about 11 percent in 2010 from 58 percent in 1993, based on U.S. government figures.
"The market for a budget carrier has to be developed, but it's there -- if they have enough capital and run a good marketing campaign," said Paul Stoll, who helped set up the Vietnam Tourism Association and is the chief executive officer of Celadon International Hotel Management Joint-Stock Co. Still, "it will be tough."
Two-Hour Flight
On the Ho Chi Minh City-Hanoi route, a VietJet Air takes about two hours compared with 30 to 42 hours by rail and 34 to 40 hours by bus. A one-way rail trip in mid-February costs 486,000 dong for a hard seat, according to the website of the Hanoi train station. The cheapest ticket on a bus operated by Vinamotor Investment Joint-Stock Co. is about 400,000 dong.
"Many people think an airplane has to be expensive, and that a bus will be much cheaper," said Singh on Jan. 27 by phone. "We are trying to reach out to this segment, to introduce the idea of using an airline instead."
VietJet also intends to start services by April to Danang, the biggest city in central Vietnam. A Danang-Ho Chi Minh City bus trip takes about 18 hours, according to bus operator Phuong Trang Investment Joint-Stock Co.
The carrier, a unit of Hanoi-based Sovico Holdings, flies from Hanoi to Ho Chi Minh City three times a day. Other operators on the route include Jetstar Pacific Airlines Joint- Stock Aviation Co., a Vietnam Airlines-Qantas Airways Ltd. venture, and closely held Mekong Aviation Joint-Stock Co. As the carrier expands overseas, possible destinations may include Singapore, Kuala Lumpur or Bangkok, Singh said.
The airline, which has leased planes from Kuwait-based Aviation Lease & Finance Co., expects to be profitable by 2014 and it may list on Ho Chi Minh City's stock exchange within the next few years, Singh said. Losses before the carrier breaks even are expected to exceed $10 million, he said.
--Jason Folkmanis in Ho Chi Minh City and Diep Ngoc Pham in Hanoi. Editors: Neil Denslow, Dave McCombs
To contact Bloomberg News staff for this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net; Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net
To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net
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