Trinh Van Quyet, chairman of Vietnam’s Bamboo Airways, told multiple media this week that it only started operating flights in January this year, but it is already planning an IPO – not in the distant future, but in 2020. He did not disclose which exchange Bamboo will be listed on.
It took less than two years from launch to IPO, which is sure to be a record for the airline. But lately, in the frenzy of development, aspirations have become blurred into rapidly changing plans. This raises questions about Bamboo Group’s IPO in 2020 and its larger business positioning, as well as whether there is room in the limited aviation industry for Bamboo Group to expand.
Bamboo hopes to raise $100 million through the IPO, which can only buy about two narrow-body aircraft, but not the wide-body 787 aircraft Bamboo plans to buy to fly to the United States. Bamboo is part of the FLC Group, a local conglomerate spanning real estate and leisure tourism. Its private ownership reflects the ambition and capabilities of non-state-owned enterprises in the privatization process of Vietnam’s economy.
As a full-service airline, Bamboo Airways is a rare start-up in the Asian aviation industry. Over the past decade, most new ventures outside mainland China have been low-cost airlines. The Bamboo fleet consists of 10 aircraft and has received government approval to increase to 30 aircraft in 2023.
This desire is also demonstrated by VietJet, a privately-owned budget airline that has rapidly grown to a fleet of about 70 aircraft. Apart from a smaller subsidiary in Thailand, Vietjet Airways has largely remained true to its business model. Bamboo has undergone some evolution during its short history.
Quyet told the Financial Times in June that Bamboo would lease second-hand A380 aircraft to accelerate growth, but Bamboo quickly said this was just a study that had been abandoned.
The industry expects Bamboo to adopt wide-body aircraft before it receives its first 787 order from Boeing. This seemed to be confirmed when a second-hand A330 emerged from a European paint shop, painted in Bamboo livery and ready for delivery. Bamboo refuted this media rumor but did not comment on the fact that one aircraft was expensively painted in Bamboo livery.
The A330 legend has been taken over by Bamboo, which announced a new development: it will lease 787-9 aircraft from an undisclosed company and put them into service this year ahead of its own 787 aircraft just produced by Boeing factories. So far, there have been limited transactions for the 787s, which are still relatively new and leased aircraft will only arrive shortly before their own aircraft.
Bamboo’s narrowbody fleet raises long-term concerns. In its pursuit of rapid expansion, Bamboo has adopted a variety of second-hand aircraft in addition to its own new aircraft. Mixed fleets are inefficient and leases often run for multiple years, meaning as Bamboo matures it will have to wait out contracts or pay penalties for early returns.
Industry observers wonder how it will adapt to Vietnam’s growth. The country’s airports and many international destinations are crowded. There are also questions about how the government views fast-growing private airlines taking market share from state-run Vietnam Airlines.
The growth of Vietjet seems to be challenging the status quo before Bamboo entered. Other startups are also brewing, including three airlines looking to launch operations in Vietnam: Vinpearl, Vietravel and KiteAir.
