Qantas reassurance on Vietnam

Qantas has insisted it remains committed to its investment in Vietnam’s second-largest airline after securing the release of two executives who were barred from leaving the country.

The executives, Daniela Marsilli and Tristan Freeman, returned to Sydney yesterday after Vietnamese authorities ”terminated” an investigation into $31 million ($36 million) in fuel hedging losses at Jetstar Pacific in 2008. Qantas jointly owns the airline with the government-owned State Capital Investment Corporation.

But the episode has raised speculation about whether Qantas will retain its $50 million investment in Jetstar Pacific. The Vietnamese airline has encountered hurdles at almost every turn over the past year, including a push from the powerful Ministry of Transport to have the airline dump its Jetstar logo.

But Qantas’s corporate affairs chief, David Epstein, said the airline was ”confident about its investment in Vietnam” and would be increasing its stake to 30 percent, the maximum limit for foreign interests.

”If we had concerns about our continued investment we would not be there,” he said.

Vietnam has a history of detaining foreigners for loss of state funds. The Dutch bank ABN Amro paid $4.5 million for the release of four employees jailed or under house arrest in 2006 over alleged illegal foreign currency trades on behalf of a state-owned bank.

Asked whether Qantas had to pay for the release of its executives, Epstein said: ”Absolutely not. We would never have done that, and it is illegal under Australian law.”

Under the agreement to invest in Jetstar Pacific, Qantas has an option to sell its entire $50 million investment back to the Vietnamese at the same price it paid for it.

Epstein said the put option was extended last month but Qantas did not plan to exercise it.

Industry insiders said the strategic rationale for Qantas retaining its investment in Jetstar Pacific was gone. Part of the rationale for the Vietnam push was based on a potentially lucrative domestic market in a country of almost 86 million people. Qantas also eyed Ho Chi Minh as a hub for long-haul Jetstar flights to Europe because the city was a cheaper than Singapore or Bangkok.

However, the Vietnamese government’s cap on fares has made it difficult to realise the domestic potential. Jetstar also opted in January for Singapore as its hub in Asia and launch pad for services to Europe.

‘The two strategic rationales for the investment � are gone,” an insider said. ”Therefore, I can imagine a complete exit.”

Tags: Qantas, Vietnam aviation, Vietnam aviation industry, Vietnam aviation market