AirAsia to launch new Vietnam airline with demand soaring

The budget airline whose chief is the malaysian businessman Tony Fernades is planning to set up a new airline to serve the South East Asian nation.

An AirAsia Airbus landing at Hong Kong’s international airport. AirAsia said it will launch a new Vietnamese carrier. Lauren Fievet / AFP

AirAsia, the low-cost carrier headed by the Malaysian tycoon Tony Fernandes, plans to start a Vietnamese carrier in a local partnership, as cheap fares and rising incomes fuel a travel surge in the South East Asian nation.

The region’s largest budget airline will partner Gumin, Hai Au Aviation Joint Stock and the businessman Tran Trong Kien for the venture, which is expected to start flying early next year, AirAsia said. Gumin will own about 70 per cent of the new venture, with AirAsia holding the rest.

Vietnam is the latest country to lure Mr Fernandes, who is seeking to build a pan-Asian budget airline, as the 28 per cent growth in passenger traffic was triple the pace in other South East Asian nations. The fifth-biggest market in the region has seen domestic traffic double since 2013, and the middle-class will comprise close to a quarter of its population by 2010, AirAsia said. The airline’s shares have gained 37 per cent this year.

AirAsia has over the years established affiliates in Indonesia, Thailand, India and Japan, and is betting on a low-cost, long-haul model for international travel through its AirAsia X unit. It has ordered hundreds of planes worth billions of dollars from Airbus to meet its growth ambitions and is in the process of selling a plane-leasing unit to raise more cash.

VietJet Aviation Joint Stock listed its shares on an exchange last month, and has gained 52 per cent since. Vietnam will continue to see a double-digit gain in passenger numbers in the next decade, after annual growth of 17 per cent in the past decade, according to ACB Securities.

“AirAsia is very late to the party in Vietnam and as a result faces huge challenges,” said Brendan Sobie, a Singapore-based chief analyst at CAPA Centre for Aviation. “The market is now well served by two low-cost carriers, VietJet and Jetstar Pacific. The rate of growth will probably slow in the coming years as the market is now more mature.”

AirAsia’s Vietnam venture will need investments of 1 trillion Vietnamese Dong (Dh161.6 million), and AirAsia will contribute 30 per cent of that after raising internal funding, according to the carrier.

Mr Kien is the chief executive of Hanoi-based Gumin, which was founded on March 29, according to Vietnam planning and investment ministry’s website. He is also the chairman and chief executive of Thien Minh Group, or TMG, which owns Victoria Hotels & Resorts in Vietnam and Laos. Hai Au Aviation is a unit of TMG.

* Bloomberg

Follow The National's Business section on Twitter