Asia Business Channel

AirAsia plans to launch joint venture in Vietnam

Malaysian budget airline AirAsia said it plans to launch a joint venture in Vietnam and wants the new carrier to start operations in the second half of 2018. The airline first revealed their plans in April 2017 when it said it would team up with local businesses to catch up with the country’s travel boom.

According to a report in Bloomberg in 2017 the airline has signed an agreement with Hanoi-based Gumin Co. and Hai Au Aviation to form the new business venture. The venture, will need investment of $40 ~ 45 million USD in order to take to the skies. AirAsia is expected to contribute 30% of the initial investment and Gumin will contribute 70%.

Commercial aviation in Vietnam has great potential for growth because of the country's fast-growing economy, sizable population with expanding consumer incomes. The country is ranked as Southeast Asia's fifth largest aviation market after Indonesia, Thailand, Malaysia and Singapore. In the period of 2015 ~ 2016, the country was the world's fastest growing aviation market.

Tony Fernandes, the Group CEO of AirAsia, commenting on the expansion into Vietnam, said that one of AirAsia’s goals is to “continue to grow our presence and market share” in the Southeast Asian region and that the proposed Vietnamese airline is “the final piece of the puzzle to complete our ASEAN connectivity.”

According to a recent AirAsia financial report, all four of the groups ASEAN carriers in Malaysia, Thailand, Indonesia and the Philippines and its affiliate airline in Indian all generated profits in the fourth quarter of 2017, the first time they have all achieved this in the same quarter.

According to Vietnamese government date, the commercial aviation sector served 71.75 million passengers in the first nine months of 2017, an increase of 17.9% compared to the same period of 2016. Airlines also transported more than 830,000 tons of goods, an increase of 34.6%.

The dramatic growth in both domestic and international tourism in Vietnam is expected to see the airline industry increase an average of 6 ~ 10% per year between 2015 ~ 2025. The government has announced plans to increase the number of airports in the country and expand and upgrade facilities at major airports including those in Hanoi, Ho Chi Minh City and Da Nang.

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