AirAsia sets up low-cost airline in Việt Nam

vietnam news

Update: April, 04/2017 – 18:00


AirAsia Berhad, the Malaysian budget airline, plans to start a low-cost carrier in Việt Nam by co-operating with local businesses. — Photo


HÀ NỘI — Malaysian budget airline AirAsia Berhad plans to start a low-cost carrier in Việt Nam, co-operating with local businesses to enter the country’s booming travel market, company representatives told Việt Nam News.

AirAsia signed a shareholders’ agreement with Việt Nam’s Gumin Company Limited, Hải Âu Aviation Joint Stock Company and Trần Trọng Kiên, the owner of these two companies, to form the venture last Friday, which the airline announced in a statement to Malaysia’s stock exchange.

The carrier, expected to start flying at the beginning of 2018, will need an investment of VNĐ1 trillion (US$44 million), of which AirAsia will hold 30 per cent stake and Gumin will hold 70 per cent.

Việt Nam is the latest country to lure Malaysian billionaire Tony Fernandes, head of AirAsia, who is aspiring to build a low-cost airline network covering Asia, as the 28 per cent growth in Việt Nam’s aviation market triples the rate in other Southeast Asian countries.

Việt Nam is also the fifth biggest aviation market in the region, after Indonesia, Thailand, Malaysia and Singapore, with a passenger volume that has doubled since 2013 thanks to a middle class population accounting for 25 per cent of the total population by 2010.

In recent years, AirAsia has established affiliates in Indonesia, Thailand, India and Japan. The airline is betting on low cost airline models for international travel through its AirAsia X subsidiary.

Fernandes has also ordered hundreds of Airbus aircraft worth billions of dollars to meet his ambition of growth, and he is in the process of selling a subsidiary specialising in leasing aircrafts to raise cash.

However, Brendan Sobie, CAPA Centre for Aviation’s analyst, told Bloomberg that AirAsia would face huge challenges, because it entered the Vietnamese market too late. “The market is currently well served by two carriers, VietJet Air and Jetstar Pacific. The growth rate will slow down in the coming years, as the low-cost market is now more mature. ”

Vietjet Aviation Joint Stock Company shares have grown 52 per cent since its listing on HCM Stock Exchange in February 28.

According to a report released by ACB Securities in December last year, passenger traffic in Việt Nam will continue to grow at double digit rates over the next decade, after an annual growth of 17 per cent in the last decade. — VNS


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