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

Illustrative image (Source: Travelandtourworld.com)

AirAsia signed a shareholders’ agreement with Viet Nam’s Gumin Company Limited, Hai Au Aviation Joint Stock Company and Tran Trong Kien, 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, which is expected to start flying at the beginning of 2018, will need an investment of 1 trillion VND (44 million USD).  Of this figure, AirAsia will hold 30% stake and Gumin will hold 70%.

Viet 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% growth in Viet Nam’s aviation market triples the rate in other Southeast Asian countries.

Viet Nam is also the 5^th 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% 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% since its listing on HCM Stock Exchange in 28 February.

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

(Source: VNS)