AirAsia garners a Vietnamese airline

AirAsia this week acquired a 30% equity stake in VietJet Aviation Joint Stock Company, the owner of VietJet Air, a start-up airline that has yet to inaugurate a single service.

The deal will set the stage for a new low-cost airline operation branded, VietJet AirAsia, to operate both domestic and international destinations. The airline?s board is now currently finalising details regarding routes, frequencies and launch of flights.

According to an AirAsia press release, the Ministry of Transportation of Vietnam approved the share acquisition, 9 February. This is the third joint venture of AsiaAsia in the region after Thai AirAsia and Indonesia AirAsia.

Licensed in December 2007, Vietjet Air is the only 100% privately owned airline licensed in Vietnam. It has a charter capital of VND600 billion (US$ 33.61 million). Before it partnered with AirAsia, the airline was struggling to commence its first flight this May after a series of postponements.

The Hanoi-based carrier had earlier been given a December deadline to launch a service, or have its license revoked according to the country?s aviation regulations. The civil aviation law restricts start-up airlines to a two-year deadline to inaugurate a commercial service.

According to its website, the airline plans to operate flights between Hanoi, Ho Chi Minh City and Danang during the initial phase and commit to ?as many domestic locations as possible, subject to profitability?.

Based on the supply of aircraft, VietJetAir plans to offer flights to regional destinations such as Hong Kong, Bangkok, Singapore, cities in southern China, Korea and Japan, subject to government approvals.

Initially, the airline?s board planned a ?premium low-cost? product that would offer free snacks and drink, but now the AirAsia ?no-frills? business model will be adopted.

Earlier, the airline?s board stated that it ?had no plans to bring in a foreign partner as it wanted to be a Vietnamese airline that reflected the best the country has to offer?.

However, with a changing business environment and difficulties at the starting post it was forced to take on board AirAsia as a partner, or face the possibility it would lose its license.

Jetstar Asia was the first foreign airline investor to do business in Vietnam, holding 30% share in Jetstar Pacific, while the Vietnamese government has a 70% stake. Jetstar and AirAsia also recently announced an alliance. But with this latest development the two low-cost airlines now face the prospect of competing head-on, rather than complimenting each other in the Vietnam market.

Sourced = The TTR Weekly