UPDATE 1-Vietnam Air to sell shares to foreign investors

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By Ho Binh Minh

HANOI, Jan 15 (Reuters) - National carrier Vietnam Airlines will hire an international consultant to advise on its initial public offering and could sell up to 20 percent of its shares to foreign strategic investors, the government said on Tuesday.

Deputy Prime Minister Nguyen Sinh Hung had agreed the airline should hire a consultant for its partial privatisation which would leave 70-80 percent of the firm in state hands, the government said in a statement on its Web site (www.chinhphu.vn).

"Vietnam Airlines will apply the privatisation scheme in which the existing state funds will be retained and will issue shares to raise the registered capital," the statement said.

The government would approve the number of shares offered to the foreign strategic investors but the initial ownership structure envisaged Vietnam Airlines selling between 10 percent and 20 percent to foreign investors, it added.

Vietnam expects air passenger traffic to more than double to 32.4 million people by 2020 from 14.5 million a year now, industry reports said.

Hanoi-based Vietnam Airlines, pressed to keep up with demand as Vietnam targets its economic growth at 9 percent this year after growing 8.48 percent in 2007, said it planned to expand its fleet to 110 planes by 2020, 74 of them from Airbus (EAD.PA).

The airline said last month its gross profit last year rose 6.4 percent to 370 billion dong ($23 million) and revenues grew 15.5 percent to 20.37 trillion dong.

The country's largest airline carried more than eight million passengers last year, 2 percent above its initial plan for the whole year, raising its seat occupancy rate to 75.4 percent, from 71.2 percent in 2006.

Its cargo handling also firmed 8.2 percent to 115,100 tonnes.

Last week, the airline signed an insurance contract worth nearly $4 billion with Vietnamese insurance firm Bao Minh BMI.HN, which covers aircraft and the nine million passengers expected aboard this year.

In December, the airline and a Vietnamese aircraft leasing firm, in which it is one of five founding shareholders, signed contracts with European planemaker EADS to buy 10 Airbus 350-900XWB passenger jets and 20 single-aisle A321 jets.

It also bought four Boeing (BA.N) 787-8 Dreamliners and Vietnam Aircraft Leasing Co bought eight of the model.

Three other airlines in Vietnam are Pacific Airlines -- 30 percent owned by Qantas Airways Ltd (QAN.AX), VASCO and VietJet Air, the country's first fully private airlines. ($1=16,103 dong) (Editing by Valerie Lee)