The Vietnamese aviation market is experiencing robust growth with significant growth rates in recent years, driving increasing demand for diverse financial solutions and aircraft leasing services. In an increasingly competitive landscape among airlines, developing a sustainable financial strategy has become a critical factor for success. This article will provide an in-depth analysis of the financial models currently being applied in Vietnam, along with emerging market trends and development prospects for the current phase.

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I. Aircraft financing models in Vietnam

Vietnamese airlines adopt diverse financial models to meet the demand for fleet expansion:

• Commercial loans: Domestic and international banks provide direct loans with competitive interest rates and flexible terms https://vietnamfinance.vn/vietnam-airlines-mua-50-may-bay-37-ty-usd-chinh-phu-bao-lanh-cac-khoan-vay-nuoc-ngoai-d127002.html
• Finance Lease: A common model allowing airlines to purchase aircraft at a discounted price after the lease term
• Operating Lease: A flexible option requiring minimal upfront investment, suitable for rapid expansion strategies
• Export Credit Agency (ECA) Financing: Financial support from export credit agencies with low interest rates and long repayment terms
• Sale and Leaseback: A rapidly growing model helping airlines optimize cash flow and balance their finances
• Bond issuance: An effective capital raising solution from domestic and international bond markets

Each financial model has unique characteristics suited to specific development strategies:

II. Parties involved in aircraft finance transactions

Aircraft financial transactions in Vietnam involve multiple parties with specialized roles:

• Airline companies: Vietnam Airlines, Pacific Airlines, Vietjet Air, Bamboo Airways, and the newly entered Viettravel Airlines – borrowers/lessees and operators of aircraft
• Aircraft leasing companies: International organizations such as AerCap, BOC Aviation, and Avolon provide leasing services. In Vietnam, the only aircraft leasing company is VALC (https://cafef.vn/dn-cho-thue-may-bay-duy-nhat-tai-viet-nam-madame-nga-ngoi-vao-ghe-chu-tich-duoc-loat-ong-lon-hau-thuan-thu-3-dong-lai-1-dong-188231214011823454.chn
• Commercial banks: BIDV, Vietcombank, HSBC, Standard Chartered – providing direct financing or co-financing
• Export credit agencies: US EXIM Bank, Bpifrance Assurance Export, UK Export Finance provide financial support for aircraft purchases
• Aircraft manufacturers: Boeing, Airbus provide financial and technical support
• Government regulatory authorities: CAAV, State Bank of Vietnam, Ministry of Finance oversee and regulate the market

III. Study of successful case examples

1. VietJet Air: Sale and Leaseback Strategy

VietJet has successfully implemented the sale and lease-back model. The basic process consists of three steps:

• Step 1: VietJet signs a purchase agreement with Airbus or Boeing, requiring only a deposit of 1–5% of the contract value.
• Step 2: Before receiving the aircraft, VietJet negotiates a sale and lease-back agreement with a leasing company such as GECAS or Castlelake. Upon receiving the aircraft, VietJet uses funds from the leasing company to pay the manufacturer and transfers ownership of the aircraft to the lessor.
• Step 3: VietJet leases the aircraft for a period of 6–12 years, with a fixed monthly lease cost of approximately 500,000–750,000 USD.

Financial benefits of this model:

• Capital release: VietJet does not need to pay the full value of the aircraft, freeing up an estimated 2 billion USD in capital from its current fleet.
• Fleet growth: Through this model, VietJet maintains a fleet growth rate of 20–25% annually, with over 100 modern aircraft such as the A321neo and A330.
• Optimized balance sheet:
  • Reduce direct liabilities.
  • Increase working capital (cash).
  • Improve asset turnover and financial ratios.
• Leveraging significant discounts: When purchasing in large quantities, VietJet receives discounts of approximately 40–50%, which are then resold to lessors at higher prices, generating profits directly from the transaction.

2. Vietnam Airlines: Diversifying capital sources

The national airline has implemented a capital diversification strategy through channels such as raising capital from the stock market, collaborating with international financial institutions, and forming joint ventures with strategic partners.

• Share issuance: Vietnam Airlines has conducted multiple share issuances to increase its charter capital, improve liquidity, reduce debt ratios, increase equity, and facilitate investments in a new fleet, including:
  • 2025: Issuing an additional 900 million shares, increasing charter capital by 9,000 billion VND. https://vietnambiz.vn/vietnam-airlines-chot-tang-von-9000-ty-dong-chi-35-ty-usd-mua-50-may-bay-than-hep-2025515155359623.htm
  • Planned for 2026: Further increase by 13 trillion VND, bringing the total charter capital to 31.144 trillion VND.
• Corporate bond issuance: Vietnam Airlines has planned to issue bonds to raise medium- and long-term capital for strategic investment projects such as aircraft purchases, network expansion, and operational infrastructure upgrades.
• Cooperation with international financial institutions: 1. ING Bank (Netherlands): Signed a financing agreement of up to 1.5 billion USD for strategic projects, including expanding the international flight network and improving operational efficiency. 2. Citi Bank (United States): Committed to providing financing of at least 560 million USD, along with strategic financial advisory and risk management support. 3. US EXIM Bank: Negotiating credit guarantees for loans to purchase aircraft and invest in infrastructure.
• Joint venture with strategic partner ANA Holdings (Japan) to expand the Japanese market, improve service quality, access advanced management technology, and strengthen global connectivity. ANA Holdings acquired 8.771% of Vietnam Airlines’ shares for approximately 109 million USD, becoming a strategic shareholder since 2016.Operating joint ventures on over 30 domestic and international routes, sharing frequent flyer programs, ground services, aircraft maintenance, and catering services.
• Performance and outlook: In 2024, Vietnam Airlines reported pre-tax consolidated profit of 7.958 trillion VND, marking a strong recovery post-pandemic. A plan to invest in 50 narrow-body aircraft worth 3.5 billion USD will be implemented from 2030, funded by equity and international loans.

3. Market penetration strategies of international leasing companies

• SMBC Aviation Capital: Long-term cooperation strategy with Vietnamese airlines
• AerCap: Providing comprehensive financial solutions from leasing to maintenance
• BOC Aviation: Investment strategy in emerging markets with controlled risk

IV. Aircraft insurance:

Insurance is a mandatory requirement for aircraft operations in Vietnam, including:

• Aircraft hull insurance: Protecting aircraft assets against damage or loss
• Civil liability insurance: Covers damages to third parties on the ground
• Passenger insurance: Compliance with the Montreal Convention and ICAO regulations
• War and terrorism insurance: Covers special risks not covered by standard insurance

Insurance requirements are detailed in:

• Vietnam Civil Aviation Law and its implementing regulations https://luatminhnguyen.com/doanh-nghiep/nganh-nghe-kinh-doanh-vi/hang-khong/huong-dan-ve-luat-hang-khong-dan-dung-viet-nam-2025/
• Decree 102/2018/NĐ-CP: Detailed regulations on mandatory civil liability insurance for aircraft owners regarding passengers, cargo, and third parties
• Mandatory clauses in aircraft charter contracts
• International Standards of ICAO and IATA

ICAO (International Civil Aviation Organization) is the International Civil Aviation Organization—a specialized agency of the United Nations established in 1944 through the Chicago Convention. ICAO sets global standards for aviation safety, air traffic management, and environmental protection.

Aircraft insurance contracts in Vietnam must meet the following basic conditions:

• Designation of the lessor and the lessors as the primary beneficiaries
• The minimum insurance coverage must fully cover the value of the aircraft and legal liability
• Provided by reputable insurance companies with high credit ratings
• Include a clause requiring at least 30 days’ notice prior to cancellation of insurance

V. Market Trends and Outlook

The Vietnamese aviation industry is witnessing significant trends in aircraft finance:

• Increased use of the Sale and Leaseback model: Vietnamese airlines are widely adopting this model to optimize capital and improve cash flow
• Shift toward next-generation aircraft: Prioritizing the leasing of fuel-efficient aircraft such as the A320neo, A321neo, and B737 MAX to reduce operating costs
• Diversifying financing sources: Combining capital from banks, leasing companies, capital markets, and private investors
• Strengthening cooperation with Asian leasing companies: Expanding relationships with partners from China, Japan, and Singapore
• Improve negotiation capabilities: Vietnamese airlines are becoming increasingly professional in contract and financial negotiations
• Adopt digital technology: Utilize big data, AI, and predictive analytics to optimize fleet financial management

VI. Opportunities and Challenges

The Vietnamese aircraft finance market is facing numerous significant opportunities and challenges:

Opportunities:

• The Vietnamese aviation market is projected to grow by 8.1% annually over the next decade

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• Vietnam is becoming an attractive destination for aircraft leasing companies and international investors
• Potential for developing specialized aviation financial services
• Opportunities to expand MRO (maintenance, repair, and overhaul) services to support an expanding fleet
• Advantages from free trade agreements such as the CPTPP and EVFTA open up opportunities for international cooperation

Challenges:

• Intense competition among airlines is putting pressure on ticket prices and profit margins
• Shortage of highly skilled technical personnel in the aviation finance sector
• Risks from fluctuations in exchange rates, interest rates, and global fuel prices
• Pressure to comply with new environmental standards such as CORSIA requires significant investment
• Aviation infrastructure remains inadequate compared to the growth rate of the fleet

VII. Future Development Directions

The Vietnamese aircraft finance market is expected to develop according to the following trends:

• An increase in the number of new airlines entering the market, creating significant demand for aircraft leasing and financing
• Shift from narrow-body aircraft leasing to wide-body aircraft leasing as airlines expand their international long-haul networks
• Development of green finance solutions for environmentally friendly aircraft fleets
• Application of blockchain and fintech in financial management and aircraft leasing
• Strengthening collaboration between Vietnamese airlines and international leasing companies
• Establishing specialized aviation financial centers in Vietnam

With its favorable geographical location at the heart of Southeast Asia and a rapidly growing economy, Vietnam has the potential to become an important aviation hub in the region, opening up attractive opportunities in the fields of finance and aircraft leasing.

VIII. Green Finance for Vietnam’s Aviation Industry

Implementing ESG standards

• Integrating environmental, social, and governance factors into aviation finance strategies
• Establishing an ESG assessment and reporting system for aircraft investment projects
• Benefits from improved corporate image and access to international capital

Green bonds for aircraft investment

• Potential for issuing green bonds to finance the purchase of new-generation fuel-efficient aircraft
• Process for verifying and certifying green bonds in accordance with international standards
• Lower capital costs compared to traditional financing sources

Incentives for emissions-reducing technologies

• Accelerated depreciation policies for fuel-efficient aircraft
• Tax incentives for investments in carbon emission reduction technologies
• Financial support for research and development of sustainable aviation fuel (SAF)

IX. Conclusion

The Vietnamese aircraft finance market is facing significant growth opportunities due to the aviation industry’s growth rate, favorable geographical location, and government support policies. To fully capitalize on these opportunities, airlines and investors need to develop comprehensive financial strategies, adopt financial models tailored to each stage of development, effectively manage risks, and stay ahead of emerging technological trends in aviation finance.

With an expected annual growth rate of 8%-9% over the next decade, Vietnam has the potential to become an important aviation hub in the region, opening up attractive opportunities in the aviation finance and aircraft leasing sectors.

X. Aviation Legal Services

We provide specialized legal consulting services for the aviation sector in Vietnam, including:

• Drafting and reviewing aircraft lease, sale, and financing agreements
• Advising on compliance with regulations regarding aircraft licensing, registration, and mortgage
• Legal support in negotiations with international aircraft leasing companies
• Advising on legal issues related to aviation insurance
• Resolving legal disputes arising from aircraft lease and finance contracts
• Advising on the Cape Town Rules and international aviation conventions

Our team of lawyers has extensive expertise in international aviation law and a deep understanding of the Vietnamese market, ready to assist airlines, aircraft leasing companies, and financial institutions in all related transactions.