If Vietjet could turn back the clock, it might think twice about leaving an US$8 million aircraft rental bill unpaid. The Vietnamese budget airline had the money, according to an English judge, but decided to hold on to it.
Five years of litigation later, the bill has now ballooned to US$250 million. Vietjet says it cannot pay, citing Vietnamese foreign exchange controls. Meanwhile, a London judge has just cleared the way, in principle, for receivers to go after the airline’s assets outside Vietnam.
Listed on the Ho Chi Minh City Stock Exchange, Vietjet is one of Vietnam’s 25 largest listed companies, with a market value approaching US$4 billion. It has been a conspicuous growth story in recent years, with ambitions reaching far beyond its home market.
It carries millions of passengers between Hanoi and Ho Chi Minh City, one of the world’s busiest air corridors. But its expanding network stretches to Seoul and Tokyo to Sydney and Melbourne. That international reach is also giving a determined creditor somewhere to look for assets.
Caught in the middle are Vietjet shareholders who may not yet appreciate quite how costly and messy the dispute could yet become.
The legal tussle began in 2021 when Vietjet fell into arrears on four Airbus A321s it had financed through Japanese leasing structures. That September, the agent for the original consortium of lenders, Natixis, proposed deferring some US$8 million in overdue payments on outstanding loans until the following June. Vietjet wrote to accept the terms in early October, apparently believing it had found a way out. But the proposal was subject to lender approval, and no binding agreement had been reached.
Meanwhile, a different sort of investor was moving into the picture. FitzWalter Capital, a London-based investment firm founded during the pandemic by former Macquarie executives, had been set up to pursue opportunities in distressed debt and other complex investments. With airlines struggling during Covid and lenders looking to reduce their exposure, there was no shortage of potential business.
Natixis had already warned Vietjet that distressed-debt buyers and hedge funds were circling to buy the outstanding aircraft loans. On 8 October, just a day after Vietjet accepted the proposed deferral, FitzWalter began buying up the loans. Within weeks, the leases had been terminated and Vietjet was facing demands for the return of the aircraft and substantial termination payments.
By 2024, the irony was becoming hard to miss. An English judge found that Vietjet could have afforded to pay the original arrears, but had chosen not to. A decision to withhold US$8 million had set in motion a dispute that would span multiple jurisdictions and ultimately cost it more than US$250 million.
The airline has returned the planes and paid some of the earlier rental and legal costs, but has paid only around US$2 million towards the much larger judgment debt.
Winning in court, however, has proved rather easier for FitzWalter than collecting the money. Its attempts to enforce the judgments have taken it from Singapore to Ireland, Australia, France and beyond, with Vietjet fighting back at almost every turn.
Vietjet insists it is not refusing to pay. Rather, it says Vietnam’s foreign exchange controls prevent it from transferring the money abroad, an obstacle that an English judge previously acknowledged appeared genuine. The obvious solution would have been for FitzWalter to obtain recognition of its judgments in Vietnam. But the Hanoi courts refused, leaving the airline in a peculiar bind: liable for more than US$250 million in England, apparently unable to remit the money from Vietnam, and increasingly exposed to enforcement against its assets elsewhere.
The latest ruling in London threatens to take the dispute into altogether more uncomfortable territory. On September 30, a London judge had agreed in principle that receivership over Vietjet’s overseas assets was justified, but wants more evidence of the likely costs before making a final order. At the time he noted: “If Vietjet wishes to preserve its business from disruption, it should pay the debt.’’
If receivers are appointed over Vietjet’s overseas assets, the consequences could extend well beyond the courtroom, potentially disrupting the airline’s aircraft purchases, leasing arrangements and international expansion plans.
For Vietjet’s shareholders, the next chapter could come as something of a shock. The airline has disclosed the dispute in its accounts, but the US$250 million-plus judgment debt does not appear to have been separately provided for.
What shareholders may have regarded as a protracted legal headache could soon become a much more tangible problem for the airline.