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Vietnam confirms AirAsia joint venture

Luc Citrinot, eTN  Apr 10, 2010

Opposition of Vietnam Airlines did not finally deter VietJet Air CEO Nguyen Duc Tam and AirAsia Group CEO Tony Fernandes to finalize a joint venture agreement in Hanoi. AirAsia recently acquired a 30 percent equity stake in VietJet Air, the first step to the launch of a Vietnam-based, low-cost subsidiary. The trade name is tentatively VietJet AirAsia. VietJet AirAsia will be operating both domestic and international flights. AirAsia's new venture in Vietnam has been fully supported by both the governments of Malaysia and Vietnam, as it represents a further opening of ASEAN skies to more travelers. The signing of the agreement occured during the 16th ASEAN Conference. Both companies also announced that they have entered into an engineering support services agreement.

According to AirAsia Group CEO Tony Fernandes: “VietJet AirAsia will complement the existing strengths of Vietnam’s tourism industry and help turn the country into a tourism powerhouse. We will be encouraging more tourists to fly to Vietnam’s various beautiful destinations with our low fares and contribute to tourism receipts that will in turn spur economic benefits. We’ll also connect Vietnam to more cities in ASEAN to boost intra-regional travel." The group, AirAsia, already served both Hanoi and Ho Chi Minh City from Bangkok and Kuala Lumpur, while Ho Chi Minh City is also linked to Jakarta and Phuket.

In February, newspapers in Vietnam reported that Vietnam Airlines had protested to the Prime Minister about the new venture and pleaded with the head of the country by alleging that the new joint venture would just simply open Vietnam’s domestic aviation market to AirAsia’s predatory behaviors. However, the Vietnamese government rejected Vietnam Airlines' assertion by reaffirming that the 30 percent stake was legal according to the existing regulations in the country. Strategically, the creation of another low-cost carrier – after Jetstar Pacific - is probably seen as a necessity to revive both tourism and air transport in the country. Tourism has been on the decline for two consecutive years, while newly-established domestic carrier, Indochina Airlines, went into bankruptcy at the end of last year. Vietjet Air originally plans to start its first commercial flights by May. The airline received its licence in December 2007 but still did not start its activity due to insufficient funds.

Airline experts assess that demand for reasonably-priced air services among Vietnamese people is huge, as local carriers currently catered to roughly ten million passengers a year in a country of 86 million people. In 2009, Vietnam Airlines indeed reported to have carried nearly 6.2 million passengers on domestic flights (+17.6 percent over 2008), while Jetstar Pacific registered over two million passengers (+30 percent over 2008).

Meanwhile, AirAsia group launched a new daily flight between Penang and Langkawi. It recently opened new routes to Chennai, Bangalore, Hyderabad, Mumbai, and New Delhi from Kuala Lumpur and from Penang to Chennai.

Vietnam confirms AirAsia joint venture

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