11/02/12, 01:58:57 EST

  e-mail this article

Vina AirAsia can’t get gov’t nod on budget airline

vneconomy.com.vn

The information that Vinashin and Air Asia signed a MOU on establishing a joint venture budget airline, Vina AirAsia, several days ago caused a stir among the public. However, in the latest happening, the project has been refused by the government.

Domestic airlines don’t welcome newcomers

Some people say that domestic airlines, including Vietnam Airlines and Pacific Airlines, did not ‘play fair’ by lodging a proposal to the government not to licence Vina Air Asia.

The two partners planned to form up a budget airline in Vietnam with the legal capital of $30mil.

It is worthy to note that Air Asia once intended to make investment in Pacific Airlines, but the two sides could not reach an agreement. According to Luong Hoai Nam, Chief Executive Officer of Pacific Airlines, the 30% of capital Air Asia intended to contribute to Pacific Airlines comprised two parts, tangible and intangible, while the intangible assets proved to be very difficult to be valued.

If not counting the intangible assets Air Asia planned to contribute to Pacific Airlines, the price the Malaysian partner planned to pay for Pacific Airlines’ stakes was too low compared to that offered by other foreign investors, including Qantas.

Meanwhile, Qantas demanded that Vietnam would not licence any new airline for three years after the air carrier made investment in Pacific Airlines.

Vietnam Airlines’ Director General and Chairman Nguyen Sy Hung told the press yesterday that the national air carrier protested the joint venture project because “Vietnam should not be so easy on issues relating to commercial freedom.”

Mr Hung said that Vietnam Airlines itself still cannot get the right to fly from Beijing to Moscow though it applied for that a long time ago. The US, the author of the ‘open sky’ policy, does not allow foreign airlines to fly domestic routes due to security problems.

Air Asia to corner domestic aviation market?

Air Asia entered Malaysia in 2001, and the airline began competing fiercely with Malaysia Airlines in 2005, making the domestic airline incur heavy losses of $500mil in the same year, and pushing the airline to the verge of bankruptcy. The government of Malaysia had to restructure Malaysia Airlines and narrow its production scale by cutting 23 international routes (110 to 87).

Meanwhile, in dispatch No 2337 of the Civil Aviation Administration of Vietnam sent to the Ministry of Transport, Deputy Head Luu Thanh Binh suggested that Vietnam prioritise licencing domestic owned airlines, while not allowing foreign invested airlines to set up at this moment.

Experts say that it is necessary to consider thoroughly the possible influences of a new airline on the domestic aviation market.

In another happening, Geoff Dixon, Chief Executive Officer of Australia’s Qantas, said directly to Deputy Prime Minister Nguyen Sinh Hung that Qantas needed more time to restructure Pacific Airlines.

 Printable Version  | published Oct 24, 2007