AirAsia: back to Vietnam?

AirAsia mulled a few years ago the idea to have a subsidiary in Vietnam. AirAsia is now back to struck a deal…

The story seems to have happened centuries ago. Back to 2010, AirAsia was mulling the idea of creating a subsidiary in Vietnam, as it already anticipated the emergence of a new travelling middle class in the country. In 2010, the Malaysian low cost carrier took a participation of 30% into Vietjet.

Soon, difficulties emerged about the branding. Vietjet wanted to keep its own name while AirAsia wanted to use its own logo and brand. With the opposition of Vietnam Civil Aviation to the project, AirAsia finally officially withdrawed from the JV with Vietjet in October 2011, citing “a failure to obtain Vietnamese regulatory approvals”.

But AirAsia is back, unfazed by its first unfortunate experience. According to Bloomberg, the low-cost carrier headed by Malaysian tycoon Tony Fernandes, plans to start a Vietnamese carrier in a local partnership. The region’s largest budget airline will partner Gumin Co., Hai Au Aviation Joint Stock Co. and businessman Tran Trong Kien for the venture, which is expected to start flying early next year, AirAsia said in a statement to the stock exchange. Gumin will own about 70 percent of the new venture, with AirAsia holding the rest.

Vietnam is the latest country to lure Fernandes, who is seeking to build a pan-Asian budget airline, as the 28 percent growth in passenger traffic was triple the pace in other Southeast Asian nations. The fifth-biggest market in the region has seen domestic traffic double since 2013, and the middle-class will comprise close to a quarter of its population by 2010, AirAsia said.

“AirAsia is very late to the party in Vietnam and as a result faces huge challenges,” said Brendan Sobie, Singapore-based chief analyst at CAPA Centre for Aviation. “The market is now well served by two low-cost carriers, VietJet and Jetstar Pacific. The rate of growth will likely slow in the coming years as the market is now more mature.”

AirAsia’s Vietnam venture will need investments of 1 trillion Vietnamese Dong ($44 million), and AirAsia will contribute 30 percent of that after raising internal funding, according to the filing.

Kien is the chief executive officer of Hanoi-based Gumin, which was founded March 29, according to Vietnam Planning and Investment Ministry’s website. He is also the chairman and CEO of Thien Minh Group, or TMG, which owns Victoria Hotels & Resorts in Vietnam and Laos. Hai Au Aviation is a unit of TMG.

 

(Source: Bloomberg)

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