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 also Chairman and CEO of Thien Minh Group (TMG) - the parent company of Hai Au.

AirAsia's joint venture in Vietnam will need an investment capital of about VND1,000 billion (US$44 million).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%, three times faster than other Southeast Asian countries. AirAsia says the market has also seen domestic passenger traffic double since 2013. The country’s middle class is also approaching a quarter of the population.

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

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

According to VNE