AirAsia Tries to Take Off to Vietnam for the Fourth Time

23rd May 2017

Malaysian budget carrier AirAsia wants in on the potentially lucrative Vietnam market, badly. The problem is, the Vietnamese airline market is closely guarded and the market interests of state-run Vietnam Airlines and budget carrier VietJet are too well protected.

Its previous three attempts to enter this market all ended up as failures. The first such try was thwarted by Qantas in 2005. Namely, AirAsia sent a proposal to support Pacific Airlines, but the Australian airline swooped in and this is why today we have Jetstar Pacific Airlines.

AirAsia then tried again in 2007, but its bid to create a joint venture with a state-owned shipbuilder was rejected by the local government. The same thing happened three years later, when AirAsia looked to acquire a 30% share of VietJet, but was once again denied by the Vietnamese government.

This, however, doesn’t seem to bother the Malaysian airline as AirAsia is attempting to enter the Vietnamese market for the third time since 2005 by forming a partnership with a local traveling agency Thien Minh Group. The two companies had their first contact in 2015, when AirAsia CEO Tony Fernandes met with TMG’s CEO Tran Trong Kien.

For nearly two years, the two companies have worked on a plan on how to best to allow AirAsia to enter the Vietnam market. What they came up is establishing a Vietnamese LCC, whose first flight is planned for the spring of 2018. The new low-coster will focus on routes that neither Vietnam Airlines nor VietJet currently serve. For example, one of those routes might be a direct flight between Nha Trang and Tokyo.

The new LCC will probably use medium-ranged Airbus A320s and A321s.

Of course, there’s no guarantee that this time the Vietnamese government will relent and allow a foreign airline operate in their market. National carrier Vietnam Airline has enough problems as it is with the competition from VietJet Air. In just six years since its debut, VietJet has taken a considerable chunk of the domestic market from the national carrier.

While competition means better service and lower fares for passengers, it’s not good news for the Vietnamese flag carrier.