Vietnamese carrier Bamboo Airways announced on Friday, March 19th, that it hopes to go public and list on a stock exchange. Known as an IPO or initial public offering, this act allows a business to issue shares of the company to the public – mainly as a way of raising capital for further growth and expansion. Let’s look at what the airline has planned…
Going public
According to DealStreetAsia, Bamboo Airways is aiming to list on a local stock exchange some time in the third quarter. More specifically, the airline wants to offer 105 million shares on one of Vietnam’s two exchanges: The Ho Chi Minh City Stock Exchange (HOSE) or the Hanoi Stock Exchange (HNX).
The airline is aiming to sell at an initial price of 60,000 dong – equivalent to $2.60. Doing the math, if all shares sold at this price, the company would raise the equivalent of $2.73 billion in Vietnamese dong.
“Market conditions are ripe for the (listing) plan,” Bamboo Airways chairman Trinh Van Quyet said in a statement reported by Reuters.
Plans to up the competition
Reuters reports that the airline has a target of raising its domestic market share to 30% by the end of this year. It currently sits at 20%. The main competition in this sector includes:
- Vietnam Airlines, the flag carrier for the country
- VietJet, a fast-growing budget airline
- Budget carrier and Vietnam Airlines subsidiary, Pacific Airlines. This carrier was most recently known as JetStar Pacific up until it was sold off last year.
With only five aircraft, VASCO (Vietnam Air Services Company) would also technically be called competition but not to the same extent as those mentioned above.
Bamboo Airways’ position in the market as a “hybrid carrier” is unique and ambitious, as explained on its website:
“An airline with a new development model, 5 stars’ service at a competitive price such as Bamboo Airways will be a new step in Vietnam’s Aviation industry.” -Bamboo Airways
Therefore, if the airline hopes to offer a premium level of service at a price point close to a traditional budget carrier, we would expect its profit margins to be slimmer than its competitors. Of course, if it can deliver on its claims, then customers should be flocking to the carrier for its better and cheaper product.
Along with increasing its domestic market share, the carrier is targeting an expansion of its aircraft fleet to 40 by the end of 2021. This represents a roughly 40% increase from its current fleet size of 28 aircraft.
So, would you buy shares in Bamboo Airways? Let us know if you think it would be a good investment by leaving a comment.
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