AirAsia Enters LCC Joint Venture in Vietnam

31st Mar 2017

AirAsia is growing its presence in Vietnam with the proposed low-cost carrier (LCC) joint venture (JV). In a statement on Friday the Malaysian low budget airline said that its unit AirAsia Investment Ltd (AAIL) had a shareholder deal and an agreement for share subscription with Gumin Company Ltd, Hai Au Aviation and Tran Trong Kien to establish a low-cost carrier in Vietnam.

According to the agreement the parties signed, Gumin will hold 69.9 per cent of the stake in the new LCC, AirAsia Investment 30 per cent, while Tran Trong Kien will have one share in the LCC. Hai Au Aviation (HAA) will form the vehicle for the joint-venture.

HAA also has a paid-up of RM19.4 million (1 billion Vietnam dong) charter capital and looks to increase that capital ten times to RM194 (one trillion dong) for the joint venture.

In addition to all of this, AAIL has also signed a shareholder loan deal with the JV to give a $2 million (RM8.84 million) loan, while Gumin will provide $4 million (RM17.7 million).

In a statement about the new Southeast Asia LCC joint venture, AirAsia said:

The rationale for the JV is to be an airline in Vietnam which offers an affordable but high-quality airline service to Vietnamese and foreign tourists by leveraging the best-in-class LCC business model which is expected to give the Vietnamese population a greater choice as well as spur overall economic growth.

The carrier added:

Improving connectivity in Vietnam would further support an uptick in GDP, providing a boost in multiple industries namely tourism, export related industries, logistics, airport retailers and airline support industries. An increase in connectivity will also stimulate demand for air travel amongst the population, opening doors to studies abroad, work related travel and sprouting of new small and medium industries.

In order to “take off” the joint venture will need a capitalization of one trillion Vietnam dong, said AirAsia. The Malaysian airline will provide a third of the capital, or 300 billion dong (RM58.2 million) and further support will be provided through loans and advances by the Board of AirAsia.