AirAsia looks to shake up Vietnam’s highly competitive air transport business following its signing of a memorandum of cooperation to create a new low fare airline with regional travel group operator Thien Minh Travel and seaplane operator Hai Au Aviation. Plans call for the new joint venture to apply for its aviation license in February before launching flights in August.
Thien Mihn Travel CEO Tran Trong Kien told Bloomberg that the new entrant would initially operate a fleet of five or six Airbus A320s and A321s to domestic and regional destinations. The airline could expand its fleet to as many as 30 airplanes within three years, he added.
According to Vietnam’s law on investment, AirAsia may not own more than 30 percent of the still unnamed airline. However, that could change thanks to a new piece of legislation proposed by the government that would relax restrictions on foreign ownership and raise the limit to 49 percent.
The proposed airline marks AirAsia’s third attempt to enter the hotly contested Vietnamese market and will likely intensify competition on incumbents like state-owned Vietnam Airlines, which directly contends for dominance on domestic routes with Vietjet, the country’s leading LCC. The JV will also compete against Vietnam Airlines’ wholly owned domestic airline, Vietnam Air Services Company (VASCO), its budget affiliate Jetstar Pacific and a fifth Vietnamese carrier—Bamboo Airways, which plans to launch its first domestic service on December 29.
Vietnam in recent years has seen rapid growth driven by a rising middle class and a surging tourism industry. According to the International Air Transport Association, the country posts some of the highest rates of traffic growth in the world, averaging 17.4 percent over the past decade. The Civil Aviation Authority of Vietnam estimates that Vietnamese airports will handle 106 million passengers by year-end, representing an increase of 12.9 percent year-over-year.
To address bottlenecks across the nation, Vietnam’s Ministry of Transport plans to spend $15 billion to develop aviation infrastructure across 23 airports. Of that amount, the ministry has committed more than $1 billion to expand Ho Chi Minh City’s Tan Son Nhat International Airport. Plans also call for a $3.7 billion expansion of Noi Bai International Airport in Hanoi.
Meanwhile, a $16 billion feasibility study on the construction of Long Thanh International Airport in the southern province of Dong Nai has gotten underway. Situated some 25 miles from Ho Chi Minh City, the new airport would receive overflow from Tan Son Nhat airport.