September 15, 2016

VietJet, the fast-growing Vietnamese low-cost airline, has delayed plans for an initial public offering in Singapore or Hong Kong because of legal complications, in what would be the first overseas listing by a company from the Southeast Asian nation.

“This has never been done before by any company in Vietnam,” Nguyen Thi Phuong Thao, the company’s chief executive and majority owner said in Hong Kong, where she was announcing the airline’s latest international route. “All of us from our side, and the advisers, cannot imagine there’s such a huge volume of documentation to process and complete for this project.”

Ms Thao, a property and banking tycoon who founded VietJet in 2011, previously said that she hoped the IPO could go ahead as early as the second quarter of this year.

By bringing low-cost air travel to the growing middle class, she is hoping to mimic the success of Tony Fernandes, who built AirAsia in Malaysia, and Rusdi Kirana, who founded Lion Air in Indonesia.

The airline carried 9.3m passengers last year and is hoping to increase that to 15m this year as it adds routes and aircraft to its existing fleet of 45 single-aisle Airbus A320s and A321s.

VietJet owns just one aircraft. But this year, it has placed orders for 100 Boeing 737s and 20 A321s to replace its leased fleet and expand capacity by roughly 10 aircraft a year.

The company is targeting an international listing in Hong Kong or Singapore but must first IPO in its home country, according to Vietnamese law.

Ms Thao said she expected strong demand from investors given Vietnam’s population of nearly 100m, its fast-growing economy and increasing consumer demand. And she hopes that the listing could still be completed this year.

But one banker familiar with the company said that discussions over valuation would be a significant hurdle.

During a speech in Hong Kong attended by Nguyen Xuan Phuc, the Vietnamese prime minister, Ms Thao said that VietJet’s success underlined the importance of the private sector in driving development in the Communist-ruled nation.

Several other local and international low-cost carriers, including AirAsia and Qantas’ Jetstar, have tried and failed to take on Vietnam Airlines, the politically powerful state-owned airline.

VietJet claims to have overtaken Vietnam Airlines in terms of domestic market share this year and analysts say that it has been aided by its close relationship with senior officials.

“The most important factor to guarantee success for a company in Vietnam is government connections and it’s clear that they have backing from the highest levels of government,” said Linh Nguyen of Veracity Worldwide, a political risk consultancy, in Singapore.

Several large Vietnamese companies, including dairy group Vinamilk and property developer Vingroup, have previously said they were interested in foreign listings, but saw their plans were scuppered by market conditions.

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