AirAsia spreads its wings to Vietnam

11 Feb 2010
Low-cost carrier (LCC) AirAsia is to launch a Vietnamese joint venture, making the country its fourth national base after Malaysia, Thailand and Indonesia.

The company has acquired a 30 percent share of locally based VietJet, a small operator that currently has only 7 percent of the Vietnamese aviation market.

Operating as VietJet AirAsia the new carrier is likely to open up the country still further given the accessibility of AirAsia’s other southeast Asian hubs in Kuala Lumpur, Bangkok and Jakarta and sprawling network across the booming ASEAN region.

A statement issued by VietJet Air said: “The joint venture is a well-balanced combination of the management system, technical expertise, long-term experience in the airline industry, crew and international brand of AirAsia, and the financial strength, as well as Vietnamese market insights of VietJet Air.”

Another low-cost carrier, Jetstar Pacific, also operates in Vietnam. The airline is also a joint venture between a local carrier and an international LCC. Jetstar is owned by Qantas and the airline operates a number of routes out of Hanoi and Ho Chi Minh City to cities such as Danang, Haiphong, Hue and Nha Trang.

However, Jetstar Pacific’s operations have not gone entirely smoothly. Currently two senior Qantas executives have been barred from leaving Vietnam until investigations are completed on allegations over safety concerns and a US$31 million loss in hedging losses. The airline’s former chief executive a Vietnamese national was arrested in January over the allegations.

A fourth carrier, Indochina Airlines, recently had its licence revoked.

State-owned Vietnam Airlines (VA) dominates about 70 percent of the country’s domestic routes. International arrivals to Vietnam were up 20 percent in January year on year. Traditionally, Vietnam has imposed pricing controls on domestic routes served by VA but this has been loosened on routes with competing carriers such as Hanoi-Ho Chi Minh City.

The country’s ministry of finance has urged the ministry of transport to increase the fare ceiling on domestic flights. If implemented, average fares will rise by around 10 percent. For example, a round-trip economy-class ticket from Ho Chi Minh City to Hanoi would cost VND2 million (US$105) including value-added tax and airport fees. Currently, the round-trip fare is VND1.8 million (US$94.50).

The changes are likely to begin from March 1.

Kenny Coyle

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