Aerospace giant Boeing has agreed to sell 20 Dreamliner commercial jets to Vietnamese start-up airline Bamboo Airways in a deal worth up to $5.6 billion, the companies announced Monday, just weeks after the airline struck a similar $3 billion deal with French competitor Airbus.
The new airline is a project of FLC Group, a publicly traded resort developer in Vietnam. FLC executives said they initially want to ferry tourists to their resorts in disparate parts of the country. But the choice to buy 787 Dreamliners — a wide-body airplane built for long-haul flights — hints at broader ambitions.
FLC Chairman Trinh Van Quyet said he wants to expand to 16 domestic routes and 10 international routes, starting with regional flights next year before later expanding to the United States and Europe.
“The deal with Boeing today is only the first step for us. We want to have more than 100 planes in the future,” he said.
The deal was celebrated in a signing ceremony at the U.S. Chamber of Commerce attended by Vuong Dinh Hue, Vietnam’s deputy prime minister. After the ceremony, the group held an investor conference at Trump International Hotel, where a stream of prepared videos praised FLC’s tourist resorts. Ted Osius, a former U.S. ambassador to Vietnam, joined a handful of U.S. and Vietnamese panelists to discuss the future of the country’s aviation industry.
Vietnam is still an officially socialist country with a largely state-controlled economy, but the government has undertaken reforms in recent years to attract foreign investment and tourism.
“Vietnam has great potential for aviation,” said Dang Tat Thang, Bamboo Airways’ newly appointed chief executive. “We chose the name Bamboo because we want to be the spirit of Vietnam.”
FLC Group is undertaking substantial risk by wading into the airline business in such spectacular fashion. While start-up airlines are not unheard of, placing such a large order without testing the market first is seen as highly unusual.
“To purchase twenty 787s indicates a degree of confidence — some would say arrogance — and very deep financial pockets,” said Henry Harteveldt, a commercial aerospace analyst with Atmosphere Research. “It indicates a willingness to ignore basic financial planning for an airline, where you usually buy a few and wait for the market to materialize. It’s a very bold, very risky move.”
Richard Aboulafia, an aerospace analyst with Teal Group, said he is skeptical that Vietnam’s aviation market can sustain another airline.
The country has three airlines regularly serving various parts of the country.
“You can lose an awful lot of money in the airline business. You’re putting all your eggs in one basket, and exposing yourself to an awful lot of expense and debt,” Aboulafia said. “But if you’re working in a controlled economy, it just might work out for you.”