AirAsia to set up new low-cost airline with Vietjet Air

11 February 2010

PETALING JAYA: After establishing bases in Malaysia, Thailand, and Indonesia, AirAsia has set its sights on Vietnam where it will establish a new low-cost airline with new partner, Vietjet Aviation Joint Stock Co (Vietjet Air).

AirAsia yesterday said in a statement it had bought from Madam Nguyen Thi Phuong Thao a 30% equity stake in Vietjet Air for 180 billion dong that would allow it to set up a Vietnam-based joint venture low-cost airline to be known as Vietjet AirAsia.

It said the stake sale was approved by Vietnam’s Transportation Ministry on Tuesday and the joint venture airline did not require fresh capital injection.

It is highly likely that AirAsia will second some of its aircraft for the operations in Vietnam and drive the venture given its expertise in running low-cost airlines.

Vietjet AirAsia will operate both domestic and international flights and is currently finalising details regarding routes, frequencies and launch of flight.

It hopes to launch commercial operations between April and June this year.

According to its website, Vietjet Air was the first private airline to receive a business licence in December 2007 but has yet to offer commercial flights.

However, its rival Indochina Airlines – the second private airline to be licensed in the country – started offering flights in November 2008.

But this airline owes almost 30 billion dong (US$1.6mil) for jet fuel and services, and has been unable to operate its sole plane since November, according to reports originating from Vietnam.

Jetstar Pacific Airlines Joint-Stock Aviation Co, 27%-owned by Sydney-based Qantas Airways Ltd, is now the only provider of domestic flights in the country apart from state-owned carrier Vietnam Airlines Corp.

Vietnam Airlines is the country’s only airline operating international flights. It carried more than 9.3 million passengers in 2009.

A total of 17.5 million passengers went through the country’s airports last year.

Vietjet Air has a share capital of 600 billion dong (RM112mil) and its founding shareholders are Sovico Holdings, HCMC Housing Joint Stock Commercial Bank and some individuals from Vietnam’s civil aviation industry.

Following the completion of the share transfer, the shareholding structure in the joint venture airline will be AirAsia via AA International Ltd with 30%, Sovico Holdings with 51% and Nguyen Thanh Hung with 19%.

The move by AirAsia to enter Vietnam is to strengthen its base in the Asean region which has a population of nearly 600 million.

“The birth of VieJet AirAsia contributes to the diversification of the aviation market in Vietnam, providing more options by way of low fares to meet the air travel needs of the people in Vietnam and in the region,” the statement said.

By B.K. Sidhu

The Star