Tuesday, November 12, 2019

AirAsia uses joint-venture vehicle to enter Vietnam 

Apr 05. 2017
AirAsia Berhad, the Malaysian budget airline, plans to start a low-cost carrier in Vi?t Nam by co-operating with local businesses.
AirAsia Berhad, the Malaysian budget airline, plans to start a low-cost carrier in Vi?t Nam by co-operating with local businesses.
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By Viet Nam News
Asia News Network

4,070 Viewed

Malaysian budget airline AirAsia Berhad plans to start a low-cost carrier in Vietnam in a joint venture with local businesses to tap the country’s booming travel market, company representatives told Viet Nam News in Hanoi.

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

The carrier, expected to start flying at the beginning of 2018, will need an investment of 1 trillion dong (US$44 million), with AirAsia holding 30 per cent and Gumin 70 per cent.

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

Vietnam 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 growing middle class population that accounted 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 ambitious growth plans, and he is in the process of selling a subsidiary specialising in leasing aircrafts to raise cash.

However, Brendan Sobie, an analyst at CAPA Centre for Aviation, told Bloomberg that AirAsia would face huge challenges, because it was late in entering the Vietnamese market. “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.”

The value of Vietjet Aviation Joint Stock Company shares has 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 Vietnam will continue to grow at double-digit rates over the next decade, after an annual growth of 17 per cent in the last decade.

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