South East Asian LCC AirAsia plans to establish a new budget airline in Vietnam in a joint venture with Vietnamese partners, AirAsia announced in a statement to the Malaysia Stock Exchange on the 31st of March 2017. The new Vietnamese LCC is expected to commence its operations by early 2018.

The company said that the new joint venture has been signed by its wholly-owned subsidiary AirAsia Investment Limited (AAIL) with Vietnam’s Gumin Company Limited (Gumin), a businessman Tran Trong Kien and Hai Au Aviation Joint Stock Company (JV Co) on the 30th of March 2017. Gumin will own around 69.99% of the new LCC, AirAsia will have 30% and Tran will own the rest.

According to AirAsia, the new venture will need investments of VND 1 trillion ($44 million), and the Kuala Lumpur-based company will contribute 30% of that after raising internal funding.

AirAsia said that Vietnam’s geographical location provides the foundation and support for the joint venture’s plans to operate domestic and international underserved routes focusing primarily in providing connectivity domestically into key cities in Vietnam as well as internationally to ASEAN, China, Korea and Japan from 3 major hubs namely Ho Chi Minh, Hanoi and Da Nang.

Vietnam is also the 5th largest aviation market in South East Asia after Indonesia, Thailand, Malaysia and Singapore. It was the fastest growing aviation market both in the world and in South East Asia in 2015 and 2016. In terms of passenger carriage (domestic and international), Vietnam’s air travel passenger carriage in 2016 was 52 million, with its growth dwarfing its ASEAN peers’, charting approximately 28% year-over-year growth in 2016 vis-à-vis its ASEAN peer’s average growth of approximately 10%.

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Vietnam’s domestic and international market has also doubled in size since 2013 and 2011 respectively. Domestic passenger growth in 2016 was approximately 25% while international growth was over 30%.

With the plan, AirAsia will enter the competitive market of airlines’ industry in Vietnam and challenge the current LCC players – VietJet and Jetstar Pacific.

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