AirAsia’s Vietnam joint venture faces turbulence

Vietnam Airlines has called on the government not to approve Malaysian budget airline AirAsia’s joint venture with a local carrier saying it would upset the stability of the Vietnamese aviation market.

AirAsia announced last month it bought a 30 percent stake in private carrier VietJet Aviation Joint Stock Company to form a no-frills airline, VietJet AirAsia, operating on domestic and international routes.

But the national flag carrier has lodged a petition asking the government not to allow AirAsia’s involvement in any form with VietJet.

Vietnam Airlines said foreign airlines are finding ways to enter the Vietnamese aviation market by buying stakes in local airlines and this would “seriously affect” the existence and development of the country’s new domestic airlines.

It has a share of more than 80 percent in the domestic market.

Vietnamese-Australian low-cost carrier Jetstar Pacific, which is expected to face a direct threat from VietJet AirAsia, has not commented on the arrival of a prospective rival.

VietJet Air general director Nguyen Duc Tam told Tuoi Tre the partnership with the Malaysian partner is in accordance with the country’s laws.

“With a stake of 30 percent in the airline, AirAsia will act as a shareholder in the company,” Tam said. “Every strategic decision by the company will be determined by the managing board by consensus.”

The airline is in the process of completing procedures to launch operations in May or earlier, he said.

The Civil Aviation Administration of Vietnam said the partnership has been approved by the Ministry of Transport, Nguoi Lao Dong (Laborers) newspaper reported.

Under current regulations, a foreign investor is allowed to own up to 30 percent of an aviation business while total foreign holding can be up to 49 percent.

But the government has asked the ministry to submit a report on the tie-up.

AirAsia had planned three years ago to set up a joint venture in Vietnam but failed to get permission.

It had announced in 2007 it would team up with shipbuilding company Vinashin to establish Vina AirAsia but the government refused to approve it after Vietnam Airlines and low-cost carrier Pacific Airlines lodged a petition.

Pacific became Jetstar Pacific in May 2008 when Australia’s Qantas Airways Ltd. bought an 18 percent stake in it.

It is one of three airlines currently operating domestic flights in Vietnam, with Vietnam Airlines’ subsidiary, Vietnam Air Services Co, being the third.

Indochina Airlines, the first operational private carrier in Vietnam, lost its traffic rights January after accumulating debts of VND30 billion (US$1.68 million) and suspending its services in late 2009.

Analysts say Vietnamese travelers would benefit from the increased competition new carriers would cause.

Tags: Air Asia, Vietnam airline market, Vietnam airlines, Vietnam aviation, Vietnam aviation industry