BCEL, Lao Airlines sign US$71m loan agreement

BCEL, Lao Airlines sign US$71m loan agreement

Banque pour le Commerce Exterieur Lao (BCEL), the largest commercial bank in Laos, has decided to partially finance Lao Airlines' purchase of two new aircraft to expand its business amid growing competition.

BCEL Deputy Managing Director Mr Onekeo Damlongboun and Lao Airlines President Dr Somphone Duangdara signed the US$71 million loan agreement in Vientiane on Tuesday to buy two Airbus 320s from French company Airbus.

The Bank of the Lao PDR will provide an additional US$20 million to the national airline to complete the US$91 million acquisition to increase the state owned enterprise's capacity to offer more flights amid growing business competition.

According to the loan agreement, BCEL will charge Lao Airlines a 6.5 percent interest rate per annum with terms of repayment of the loan and interest lasting until 2019. The Bank of the Lao PDR will charge the state owned enterprise an interest rate of 4.5 percent a year.

Lao Airlines also signed a memorandum of understanding with Lao-Viet Insurance to underwrite the new aircraft, which are scheduled to arrive in Laos at the end of this year.

BCEL Bank Administration Office Head Mr Khamhou Thongthavy said the loan was one of largest investment projects the bank has financed in Laos this year but it will provide big returns in the future.

The bank still has enough capital to issue more commercial project loans because it has mobilised investment funds from public deposits this year, he told Vientiane Times in an interview last week.

The bank received cash deposits of around 11 trillion kip over the first six months of the year, while issuing loans of around 3.478 trillion kip, he said, adding that the bank invested some of the money in government bonds and other financial businesses.

The decision to fund the aircraft purchase reflects the country's top financial institution's faith in Lao Airlines' growth potential, particularly in building management capacity to address challenges and take advantage of opportunities as Laos becomes increasingly integrated in the regional and global community.

Lao Airlines has already placed purchase orders for the two 142-seat airbuses with the first scheduled to arrive in Vientiane in the third week of October and the second in the fourth week of November. The final purchase price of the two aircraft is confidential.

The airline will use the two planes for the recently announced Vientiane-Singapore route and to replace ATR aircraft on the Vientiane-Bangkok and Vientiane-Hanoi routes.

Lao Airlines President Dr Somphone Duangdara said that the decision of the company and Lao government to purchase the aircraft was based on a thorough analysis of the business potential and increasing customer demand.

vientiane times