‘Bikini Airlines’ and its billionaire battle a buyout fund

It’s been nearly a year since the billionaire known as Madam Thao had four Airbus A321s grounded on the tarmac in Vietnam.

And all this time, the airliners have sat, stranded, in one of the odder international incidents since Vietnam went from communism to a form of capitalism.

The story stretches from the People’s Court of Hanoi to the elegant Mayfair area of London, and from there up to spired Oxford, where Madam Thao – formally, Nguyen Thi Phuong Thao — planned to have her name etched into college history, along with medieval namesakes like Balliol and Merton.

At the center of it all is a dispute between Thao’s young airline, VietJet Aviation JSC, and a London buyout fund that specializes in leasing aircraft, including those four A321s.

From its tony Mayfair address, FitzWalter Capital Ltd., co-founded by former Macquarie Group Ltd. mastermind Ben Brazil and backed by UK and Australian pension funds, says VietJet has fallen behind on rent for the four planes and breached their contract. It sued the budget airline — popularly known as “Bikini Airlines” for previous promotional stunts involving models in two-piece swimsuits posing as cabin crew – and demanded payment and return of the jets. It’s seeking $191 million.

VietJet’s response: Bring it on. In its defense filed with the High Court of Justice in London, the 12-year-old airline, font of Thao’s self-made fortune, has acknowledged it missed some bills after Covid-19 upended air travel. But it added that the original lessors FitzWalter took over the planes from had at some point agreed to soften the terms of its lease. Besides, the London investment firm hasn’t suffered any real economic damage.

The squabble has reached the highest court in Vietnam and become a hot topic in aviation industry circles.

The episode might seem like a small worry given the headwinds many carriers are still facing post a pandemic that triggered drawn-out disputes between lessors and airlines internationally. But it could pose a risk to a country that’s trying to convince investors it is a good place to do business as its fast-growing economy slows amid a downturn in exports.

“This emphasizes the fact there are always going to be some bumps in the road for investors in a place like Vietnam,” said Alan Polivnick, a partner focusing on aviation law at the international law firm Watson Farley & Williams. “In a number of these emerging markets, the rule of law is quite a different concept to what it would be in places like the US.”

VietJet “has been defending its legitimate interests in a dispute over four aircraft that occurred during the most stressful time of the Covid-19 pandemic,” the company said Wednesday in response to queries from Bloomberg News.

Because of the ongoing court case in the UK, due to be heard next year, VietJet said it can’t go into details but “we are and will be continuing to defend ourselves to protect our authenticity and our legitimate interests and we believe that justice will prevail.” 

In a statement to Bloomberg News, Jonty Nel, chief executive of FitzWalter Capital’s aviation business, said VietJet appeared to have the money to make good on its payments and had simply chosen not to.

“VietJet was simply in longstanding default on its rent,” Nel said in the statement. “It seemingly has the capacity to pay but operates as though it can treat its commitments with impunity.” 

It’s one more remarkable turn for Thao, who sensed opportunity in the nation’s emerging quasi-capitalist landscape long before Vietnam’s economy took off and began to surpass some of its neighbors.

While studying at Plekhanov Russian University of Economics in Moscow during the Cold War, a teenage Thao imported clothing, fax machines and other items from East Asia to sell to Muscovites hungry for foreign goods. By 21, she was a millionaire.

Thao launched VietJet in 2011 and took the company public on the Ho Chi Minh City Stock Exchange little more than five years later. At a celebratory dinner that evening, an exuberant Thao in a bright green mermaid-cut dress serenaded guests with a song.

Thao, now 53, has said she doesn’t keep track of her wealth, estimated at more than $1.5 billion, according to the Bloomberg Billionaires Index. But she has no shortage of ambition: She wants to build VietJet into an airline akin to Dubai-based Emirates, a successful global carrier from a small country. The largest airline by market share in Vietnam, VietJet has a fleet of 99 and has 264 more on order, according to analysts at Bloomberg Intelligence.

It’s been a bumpy flight lately. Over the past five years, VietJet’s stock price has declined about 35%, bringing the value of Thao’s total stake to almost $900 million as of Thursday. VietJet reached agreements with Boeing Co. and Airbus SE to restructure aircraft order deals in 2022 and 2021, respectively, after Vietnam’s government banned most flights during the pandemic, putting local carriers at risk of bankruptcy. 

Like many billionaires and mere multi-millionaires, Thao has been looking to spread her wealth in ways that can buy international prestige. In October 2021, she pledged 155 million pounds ($198 million) to Oxford’s Linacre College, founded in 1962 and named after Thomas Linacre, the Renaissance physician and scholar.

That promise, signed before the premier of Vietnam, includes a proposal to rename the school Thao College. Her arrival in Oxford coincided with a broader push by the Vietnamese government to sell the country as a hot destination for investment.

But then, amid the VietJet-FitzWalter dispute, the donation suffered delays, with Oxford still awaiting the first installment more than a year and a half later. A representative for Linacre College, Amjad Parkar, said that UK and Vietnam are dotting i’s on the deal and working to make details of the donation fully transparent. 

“Following productive face-to-face meetings in Vietnam we are now putting all the relevant processes and paperwork in place,” Parkar said in a statement.

Court Tussles

In the meantime, the international fight over four A321s lumbers on.

Last December, acting on orders from the High Court of London, VietJet handed possession of the A321s to FitzWalter. The firm changed the planes’ registration from Vietnam to the island of Guernsey, the offshore haven off the coast of France.

Two months later, a VietJet shareholder won an injunction from the People’s Court in Hanoi to block that move and keep the planes in Vietnam. In aviation industry circles, the turnabout drew comparisons to the Kremlin’s decision to re-register hundreds of planes after the US and others imposed sanctions on Russia for its invasion of Ukraine.

FitzWalter subsequently sued in Singapore, contending Thao’s VietJet was behind the move. In filings related to its lawsuits, the firm cited conversations between FitzWalter and Donal Boylan, a VietJet director and Hong Kong-based partner at investment and advisory firm BCAP Holdings.

According to the filing, Boylan made “a thinly veiled threat” that the Vietnamese government may intervene on VietJet’s behalf. 

“I cannot speak for the Vietnamese government, but my sense is they are not going to collaborate with anyone from the UK or Singapore or anywhere else, and this could go on for years,” Boylan is alleged to have said to one of the partners at FitzWalter during negotiations, before the buyout firm laid out details of its claim in court last October. 

“But that’s not a threat, that’s just an observation, a Donal Boylan observation.’”

Five days after the Singapore filing, the People’s Court of Hanoi withdrew its injunction. 

FitzWalter is now working to bring the planes to airworthy status and secure government approvals. With limited hangar space available to do the maintenance, the planes have to be worked on one at a time.

“We’ve worked with them and most of the issue has been resolved,” said Ho Minh Tan, deputy head of Vietnam’s Civil Aviation Administration. “The planes should be able to leave the country once all customs procedure are completed,” he said, without elaborating.

The A321s could make their way out of Vietnam by the end of the year, said people familiar with the matter, provided the dispute doesn’t take yet another turn. Until then, one of them sits in Ho Chi Minh City, while the other three are grounded in Hanoi. There on the tarmac, near a hangar, the VietJet logos on one of them have already been painted over white.