Aviation leasing watchdog issues warning on Vietnam after jet dispute

By Tim Hepher and Francesco Guarascio

PARIS/HANOI (Reuters) -An aviation industry body has issued a warning about Vietnam's compliance with international aircraft leasing norms after a dispute over the repossession of four jets, raising questions over the cost of financing future deliveries.

Vietnam is one of the world's fastest-growing air travel markets, with hundreds of jets on order and air transport representing 5% of GDP, according to the International Air Transport Association.

The Aviation Working Group, a UK-based entity that monitors financing laws on behalf of planemakers and lessors, said it had placed Vietnam on a watchlist after a Hanoi court blocked an attempt to seize jets over an alleged rental payment default.

It did not name the airline involved, but an updated version of the warning was posted on its website with a link to a file named "Update No. 1 re VietJet".

VietJet, which is one Asia's largest low-cost carriers, did not respond to a request for comment. Other Vietnamese carriers also declined comment or did not respond.

VietJet operates Airbus jets and has ordered a total of 186 jets from the European firm including 114 A320neo models that have yet to be delivered. It has also ordered 200 Boeing 737 MAX, none of which have been delivered.

Under a treaty known as the Cape Town Convention (CTC), of which Vietnam is a member, airlines are able to secure better financing rates in return for their nations making it easier for lessors to repossess jets in the case of missed payments.

The treaty allows for jets to be de-registered, or removed from the host country's airplane register, in the event of a lawful request from the lessor and placed on an international register, allowing the owner to fly the aircraft away.

The AWG said the unnamed lessor had requested this step between November and January, backed by a court order in England, whose courts had jurisdiction over the lease contract.

Vietnam's regulator agreed to de-register the jets, but in February a Hanoi court quashed that move following a lawsuit from one of the airline's shareholders, it said.

The lessor's request and the negative Hanoi court decision "are material developments that implicate CTC compliance in Vietnam," the AWG bulletin said.

Vietnam's aviation regulator and foreign ministry did not respond to requests for comment.

Airbus declined comment and Boeing could not immediately be reached for comment.

(Reporting by Tim Hepher; editing by John Stonestreet)