AirAsia plans to establish affiliate in Vietnam

Malaysian low-cost carrier AirAsia, plans to partner up with a domestic firm to start an airline in Vietnam.

Accordingly, AirAsia will team up with Gumin and Hai Au Aviation to establish a joint venture that is expected to be launched from the beginning of next year.

AirAsia Investment has signed an agreement with Gumin, Hai Au, and Tran Trong Kien, CEO of Gumin as well as chairman and CEO of Thien Minh Group (the parent company of Hai Au), for the affiliate.

The joint venture will need an investment of VND1 trillion ($44 million). Of the total, Gumin will hold 70 per cent of the stakes, while the rest will belong to AirAsia.

Vietnam has been the latest country appearing on the radar of AirAsia in its plan of building a pan-Asian budget airline. Domestic airline passengers have doubled in number since 2013. The middle class is growing to one fourth of the population.

Over the past few years, AirAsia has established affiliates in Indonesia, Thailand, India, and Japan. It has ordered hundreds of billion-dollar planes from Airbus to meet the increasing demand. Also, it scheduled the sale of its plane leasing business for more cash.

“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 at a recent interview with Bloomberg on the issue. “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.”

By Trang Vu