Can 'Bikini Airline' VietJet Dominate Cheap Flights?

I'll bet you don't get this in Emirates marketing materials: VietJet as a Southeast Asian force in budget carriers.

Here's a rather unexpected love letter to the positives of both market socialism and Southeast Asian economic integration. Although doi moi policies opening Vietnam up to the rest of the world were implemented during the mid-1980s, it's taken some time for the Vietnamese to catch up in terms of market development with the rest of the region. Its total stock market capitalization is around $46.01B according to World Bank figures. However, that may change soon.

Civil aviation has been a noteworthy industry for Vietnamese development. For a long time, folks there obviously couldn't travel so freely--to other Southeast Asian destinations especially. However, various integration initiatives in the region like 'Open Skies' have played a part in expanding the market in newer accession countries Cambodia, Laos, Myanmar, and of course Vietnam:

The Vietnamese airline industry is currently quite small, but it is poised for massive growth with the domestic airlines planning to either double or even triple their fleets as they seek to service the country’s 90 million plus citizens over the next few years. Further, the fast growing tourist industry has been increasing at a 20 percent rate year-on-year.

Industry analyst Brendan Sobie said Vietnam – along with Laos and Burma – are considered “frontier markets” with enormous potential for growth. As a result, international aircraft manufacturers such as Boeing and Airbus are finding Vietnam to be an increasingly attractive market.

An example of this growth can be seen in the case of Vietnam’s first private airline, VietJet Aviation Joint Stock Co, which has just placed an order worth US$9 billion for 92 Airbus jets. The airline is also looking to list itself on either the Hong Kong or Singapore stock exchanges in order to help its expansion.

This of course brings us to VietJet. While budget carriers have proliferated in the region, some as low-cost subsidiaries of existing airlines, others have been established by budding entrepreneurs. To the rest of the world, VietJet is best-known for its gimmick of parading bikini-clad stewardesses in fight cabins. Lest you think this is a "sexist" airline, let it be known that its CEO is actually female, Madam Nguyen Thi Phuong Thao. (Political correctness aside, she probably sees a good marketing gimmick to reel in male customers.)

Perhaps unfortunately, the 'bikini airline' image has obscured the more important point that VietJet is poised to become a regional force--especially in low-cost carriers. The Vietnamese market is booming; of that there is no doubt. With its initial public offering (IPO) or share sale soon, some expect its valuation to surpass even that of longstanding Southeast Asian national carriers like those of Malaysia, Indonesia and Thailand:

VietJet, which featured dancing flight attendants clad in bikinis on an inaugural route and bikini models on its airplanes for a desktop calendar, carried 9.3 million passengers in 2015, an increase of 66 percent from 2014. Revenue soared 205 percent last year to 10.9 trillion dong ($488 million) while net income rose to almost 1 trillion dong, according to the company. The airline expects revenue to double this year and passenger capacity to reach 15 million this year.

The airline is aiming to seek a valuation of at least $1 billion for the initial stock sale, according to two people with knowledge of the plan, who asked not to be named because the information is private. That would make VietJet a more valuable company than Malaysia’s AirAsia Bhd., PT Garuda Indonesia or Thai Airways International Pcl.

VietJet will probably surpass national carrier Vietnam Airlines as the nation’s biggest domestic carrier this year, according to CAPA Centre for Aviation. Vietnam is expected to rank among the world’s 10 fastest-growing aviation markets in the next two decades, according to the International Air Transport Association.

“It’s an ideal market for low-cost carriers,” or LCCs, said Brendan Sobie, Singapore-based chief analyst at CAPA Centre for Aviation. “This makes VietJet an attractive scenario for investors. They don’t have the risks other LCCs have in terms of over-capacity and competition.”

I can still hardly believe it: VietJet only begun operations in 2007, and yet it's now being expected to surpass the market capitalization of several established regional carriers that have been plying their trade for decades. The Bloomberg article goes on to say that VietJet wants to be the Emirates of Southeast Asia. I say: 'perhaps.'  While Emirates is another relative upstart which has garnered a lot of market share, let's just say that Emirates flight attendants are rather more fully attired even if they too are rather attractive.

As i said, it's two cheers for market socialism and Southeast Asian economic integration.

3/24 UPDATE: Bloomberg now has a profile of VietJEt founder Nguyen Thi Phuong Thao, who is posied to become Vietnam;s first female billionaire.