Vietnam has another low-cost airline

Low-cost airline AirAsia is planning to open an airline in Vietnam through a joint venture with a domestic enterprise.

AirAsia will partner with Gumin and Hai Au Aviation Company. The new airline is expected to begin operations early next year, according to a source at the Malaysian airline.

AirAsia Investment has just signed an agreement with Gumin, Hai Au and Mr. Tran Trong Kien to establish a joint venture in Vietnam.Mr. Kien is currently CEO of Gumin and Chairman and CEO of Thien Minh Group (TMG) - the parent company of Hai Au.

AirAsia's joint venture in Vietnam will need investment capital of about 1,000 billion VND (44 million USD).Gumin will own 70% of the joint venture, with AirAsia holding the remainder.

AirAsia wants to set up a joint venture in Vietnam. Photo: Bloomberg

Vietnam is the latest country to attract AirAsia in its campaign to build a pan-Asian low-cost carrier. Passenger growth in Vietnam is 28%, triple that of other Southeast Asian countries. AirAsia says the market has also seen domestic travel double since 2013. The middle class is also approaching a quarter of the population.

AirAsia has established subsidiaries in Indonesia, Thailand, India and Japan over the years. It has ordered hundreds of aircraft worth billions of dollars from Airbus to fuel its growth and is planning to sell its aircraft leasing business to raise cash.

"AirAsia has been quite late to Vietnam. Therefore, they will face a big challenge," commented Brendan Sobie, an analyst at CAPA Centre for Aviation. "This market already has two low-cost airlines, VietJet and Jetstar Pacific. The growth rate in the coming years may slow down, because the market is saturated."

According to VNE