New Vietnamese decree renders conversions unlikely

When a new Vietnamese law goes into effect on Jan. 1, 2020, the country’s carriers will find it much harder to dry-lease and operate their own freighter-converted aircraft.

Decree No. 89/2019/ND-CP adds a new article governing the age of used aircraft imported into Vietnam. While passenger aircraft cannot be older than 10 if they are purchased or 20 if they are leased, the age of cargo aircraft cannot exceed 15 if they are purchased or 25 if leased.

From a narrowbody conversion perspective, this rule effectively precludes almost all 737 Classics, production of which ended in 2000, and most 757s, production of which ended in 2004, especially considering that many of the younger frames are still in passenger service.

A Vietnamese carrier might struggle to make it work even with 737 NG and A320 family aircraft. Under the new law, if an airframe is converted at around twenty years of age, it would only be able to be dry-leased to a Vietnam-based carrier for a maximum of five years. Assuming a dry-lease term of ten years, a Vietnamese carrier would have to secure and convert a fifteen-year-old aircraft.

Widebody conversions would suffer from the same hurdles too, leaving aside their likelihood or feasibility.

All this means that it is now very unlikely that low-cost carrier VietJet’s plans to add its own narrowbody conversions will go ahead. Is the only way forward to opt for production freighters, then? Not quite. The legislation does not appear to apply to wet leases, and Cargo Facts wouldn’t be surprised to see VietJet, as well as other carriers in the country such as Vietnam Airlines, turn to ACMI operators to address their freighter needs going forward.

VietJet recently signed a strategic cooperation agreement with China-based YTO Cargo Airlines that could lead to ACMI flights between Vietnam and China.

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