Wednesday, September 26, 2007

Vietnam creates new low cost airline

Hanoi-based Vina AirAsia will become the fifth carrier in the fast-expanding Malaysia-based low-cost carrier group

Malaysian low-cost airline group AirAsia is to further expand its reach in the Asia-Pacific through the establishment of an associate carrier in the fast-growing Vietnamese market.

AirAsia has signed a letter of intent with state-owned Vietnam Shipbuilding Industry Corp (Vinashin) to establish a new low-cost carrier that will be known as Vina AirAsia. Malaysia's AirAsia intends to have a 30% stake in the new Hanoi-based airline, which is the maximum it will be allowed to control.

Vietnam's government last year announced it would ease ownership restrictions to allow foreign groups to control up to 49% of local carriers, but it would cap at 30% the shareholding that a single foreign group could have. Vina AirAsia plans to launch with domestic services using Boeing 737-300s before expanding into the international market. "They're looking at having nine aircraft within two years," says AirAsia. A launch date has not yet been disclosed.

Vinashin will be responsible for securing government approvals while AirAsia will procure aircraft, provide management expertise and set up the main airline infrastructure. AirAsia already has 49%-owned low-cost associate carriers in Indonesia and Thailand that operate both domestic and short-haul international services. The main ­Malaysian operation also operates domestic and short-haul services while a new long-haul sister carrier, AirAsia X, plans to launch services in October.

There are currently two main airlines operating in Vietnam, both of them controlled by the government. National carrier Vietnam Airlines is a full-service operator while Pacific Airlines is a small low-cost carrier which recently became 18%-owned by Australia's Qantas Airways.

Vietnam has been recording strong growth in passenger traffic in recent years, in part on the back of new low-cost airline services by foreign carriers such as AirAsia, and Singapore's Tiger Airways and Jetstar Asia.