AirAsia’s Vietnam venture fails to take off

AirAsia has announced the termination of proposed joint venture in Vietnam, which refers to the announcements dated March 31, 2017 and December 6, 2018.

“The wholly-owned subsidiary AirAsia Investment Limited, together with Gumin Company Limited and Hai Au Aviation Joint Stock Company, have amicably agreed to terminate and release each other from all obligations under the transaction agreements in relation to the proposed joint venture in Vietnam”, the low-cost carrier said in a statement.

The company nonetheless claims it remains interested in operating a low-cost airline in Vietnam due to its favourable geographical location, expanding aviation market and overall growth potential.

In a tweet, AirAsia Group chief executive Tony Fernandes said Vietnam is “very much in the plan”.

“I am still optimistic of AirAsia being in Vietnam by end of the year. Watch this space. Picking the right one,” he tweeted.

On the sideline of Vietnam Travel and Tourism Summit 2018 held in Hanoi a few months ago, Fernandes told TheLEADER that he expected his new carrier in Vietnam to begin operations in July or August this year.

“We have a strong database, strong digital marketing, that is big advantage we have in Vietnam aviation market,” he said.

Fernandes said that he needs to build a new market, new routes instead of completing.

AirAsia began eyeing Vietnam after four years of operation. The Southeast Asia's largest low-cost airline had tried but failed to become a strategic shareholder of Jetstar Pacific.

In 2007, AirAsia signed a letter of intent with Vietnam Shipbuilding Industry Corp to set up a Hanoi-based airline, but failed to get an operation licence.

In 2010, the airline tried again with a plan to buy 30 per cent of start-up VietJet but the entry was opposed by Vietnam Airlines. It then dropped out of the venture as Vietnam authorities were unwilling to allow use of the AirAsia brand within the country.

In early April, 2017, the Malaysian budget airline signed a shareholders’ agreement with Gumin Company Limited and Hai Au Aviation Joint Stock Company. Accordingly, AirAsia will hold 30 per cent stake and Gumin will hold 70 per cent of $44-million carrier.

Last December, Fernandes and his counterpart from Hai Au Aviation, Tran Trong Kien, signed a memorandum of understanding to cooperate in construction, infrastructure and human resources to establish a low-cost airline which, if licensed, will be the sixth carrier in Vietnam.

However, it failed one more time.

In Southeast Asia, AirAsia is the biggest budget carrier and it has established branches in Indonesia, Thailand, India and Japan. The carrier operates 141 return flights weekly on 13 routes and has carried 12 million passengers to and from Vietnam since entering in 2005.