Turkish Mulls Leasing A380s from Malaysia

Malaysia Airbus A380-800

Reports have surfaced that Turkish Airlines (TK) is considering leasing two Airbus A380s from Malaysia Airlines (MH).

TK had previously been reported as being in negotiations with Airbus to acquire 10 or more of the superjumbo airliners.

The largest aircraft currently in TK's fleet is the Boeing 777-300ER (B773), configured to carry 337 passengers. MH's A380 is configured to hold 494 total.

Turkish 777-300ER

This may be a greatly beneficial move for both airlines. TK would have a quick and relatively easy way to acquire A380s for a "test drive" to see if its presence in the TK works with the airline's operations and expansion plans without a long term commitment. 

Financially-strapped MH, on the other hand, gets to offload the costs of a huge, expensive-to-operate aircraft it no longer needs. MH is in the midst of a intensive restructuring effort to bring the carrier out of massive operating losses, fueled in large part by the dramatic losses of two separate flights last year.

MH370 disappeared in March under mysterious circumstances, and MH17 was shot down over Ukraine-Russia border by parties unknown. There were a total of 537 souls on board the two flights.

One can't blame MH for offloading its flagship aircraft. A 6 aircraft order for A380s led to the downfall of Japanese low-cost carrier Skymark (BC), which recently declared bankruptcy in large part because it could not fulfill the order. 

Airbus is seeking a penalty payment of up to 70 billion JPY (US$589.5 million) for the canceled order, on top of the 26 billion JPY (US$21.9 million) already paid by BC.

VietJet Air wants to grow aggressively, gets money to do it, needs even more money

A VJ A320 in typical company livery. There are several planes
acting as flying billboards, with large advertiser logos.

VietJet Air (IATA code: VJ) is not the first privately-owned airline in Vietnam, but has been the most successful up until now, and has aspirations of continuing its success in a big way.

This is even more notable in that it's primary competitor is state-run Vietnam Airlines (VNA), with a deep war chest of funds to rely on. Most other private competitors have folded shortly after commencing service.

What sets VJ apart is its low cost carrier (LLC) concept, versus VNA's traditional full-service. VJ charges a very low base fare for the plane ticket itself (sometimes as low as US$0), then has fees for almost everything else; ticketing, preselecting seats, purchasing food and drinks on board, even just the mere act of paying in any form incurs a fee.

And people have loved it. VJ trumpeted an 88% load factor and carrying their 10 millionth passenger in its 3 years of existence. The carrier generated nearly US$379 million in revenue in 2014, and even started up its own subsidiary, Thai Vietjet Air.

Leaked photo alledgedly from a bikini
photoshoot onboard a VJ aircraft.
Image source: Tuoi Tre News

Its exuberance has also drawn the ire of the socially conservative Vietnamese government, their most famous incident being an unauthorized in-flight bikini show in 2012 that lead to a nearly US$1,000 in fines. More recently in late 2014, photos were leaked from a purported racy photoshoot that VJ has since disclaimed as unauthorized and not part of an official company promotion.

The company currently has 20 Airbus A320 aircraft operating 150 flights a day to every major city in Vietnam, and several smaller communities, but that's still not enough.

Last year, VJ committed to acquiring up to another 93 A320-family aircraft from Airbus for up to US$9 billion at list prices... even though airlines usually don't pay full price, that's a lot of planes for a young startup company. The order includes 14 current A320s, 43 more-efficient A320neos, and 7 of the larger A321s (the same aircraft VNA uses as its workhorse), with the remaining as options for additional aircraft.

To assist VJ's fleet expansion plans, TPBank of Hanoi has extended a US$400 million line of credit for their initial set of aircraft. This is on top of a US$21 million credit for the down payment of the Airbus order.

VJ is also mulling a bond sale to raise US$200-300 million. as well as an initial public offering (IPO) aimed to raise another US$500-800 million.

Plans for international long-haul expansion have been tempered to focus on strengthening it's domestic network and growing its regional footprint. VJ has decided to take the strategically safer growth plan and temporarily hold off on acquiring widebody aircraft for long-haul services. 

Delaying the start of long-haul service on widebody jets is probably a smart play, especially in light of Japan's Skymark Airlines (BC) declaring bankruptcy, due mainly, according to experts, to its order of the massive Airbus A380 to start Tokyo-New York service, even though BC was primarily a domestic airline using single-aisle aircraft.

2015 should prove an interesting year for VJ, as well as VNA if VJ continues on its trajectory of growth and revenue.

What has been your experience with VJ... would you recommend them? If you haven't flown VJ, would you give them a change, or would you rather stick to traditional-service VNA?