AirAsia fails in fourth Vietnam joint venture bid

By Anh Tu   April 21, 2019 | 08:23 pm PT
AirAsia fails in fourth Vietnam joint venture bid
Despite four failed attempts to set up a joint venture in Vietnam, AirAsia remains positive about launching its own airline in the country. Photo by Reuters
AirAsia’s recent announcement that it is giving up plans to launch a joint venture in Vietnam marks its fourth failure.

The Malaysian airline said in a recent statement it has ended its agreement with local companies Gumin Company Ltd and Hai Au Aviation to set up an airline, which was supposed to start operating in August. 

AirAsia’s latest move comes after three previous failed attempts.

In 2005, the airline had proposed to be an investor in the state-owned Pacific Airlines (now Jetstar Pacific), when the government began to allow foreign investment in the aviation sector.

The Malaysian airline had at that time suggested that Pacific Airlines operates as a low-budget carrier with transportation costs of about $15 per flight hour. AirAsia would provide technology, training and management. Its CEO Tony Fernandes had said that even if the deal failed, he would consider starting a low-cost airline in the country.

The deal failed. AirAsia wanted to invest with aircraft, but Pacific Airlines wanted cash. In 2007, Pacific Airlines sold a 30 percent stake to Australian airline Qantas Airways.

Fernandes persevered. In his second attempt in August 2007, AirAsia inked a deal with Vietnamese state-run shipbuilder Vinashin to establish an airline venture with a charter capital of $30 million.

Vinashin was supposed to help the venture get permission from the government, while AirAsia would get aircraft at competitive prices.

The deal failed again, with the government not allowing Vinashin to expand to aviation, a non-core business field.

In February 2010, the Malaysian airline announced that it would buy a 30 percent stake in Vietnamese budget carrier VietJet to become its only foreign shareholder. However, the very same year, AirAsia said that it could not reach an agreement with Vietnamese authorities on the use of the AirAsia brand in the country.

Despite its four failures, the Malaysian airline, which operates flights from Vietnam to other ASEAN destinations like Malaysia and Thailand, is still interested in Vietnam’s booming aviation market.

Air travel has been growing fast in Vietnam in recent years. Among the 70 million passengers that flew to Vietnam last year, 50 million were transported by local carriers, up 10.1 percent from 2017.

The country now has five airlines operating: flag carrier Vietnam Airlines and its low-cost arm Jetstar Pacific, budget carrier VietJet, private airline Bamboo Airways and Vietnam Air Services Company (VASCO).

Waiting in the wings are military-run carrier Vietstar Airlines and travel company Vietravel, which has also applied for a license.

In the latest statement on the termination of its venture with Vietnamese companies, AirAsia said that it still wanted to operate a low-cost airline in Vietnam due to "its favorable geographical location, expanding aviation market and overall growth potential."

CEO Fernandes tweeted: "I am still optimistic of AirAsia being in Vietnam by end of the year. Watch this space. Picking the right one."

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