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AirAsia to Launch Vietnamese Budget Airline in 2018

One month after VietJet made its debut on the Ho Chi Minh City Stock Exchange, regional budget carrier AirAsia has announced its intention to expand to Vietnam, launching a new airline with the help of a local partner.

According to Nikkei Asian Review, Asia’s largest budget carrier by fleet is planning to work with local firm Gumin to cash in on one of the fastest-growing aviation markets in the world.

AirAsia’s partner in the venture will, Gumin Company, is operated by CEO Tran Trong Kien, who also heads the travel firm TMG, owner of Victoria Hotels & Resorts. Under the new partnership, AirAsia will own a 30% stake in the low-budget carrier Hai Au Aviation, while Gumin and Kien will have a 70% stake.

Moving forward, the partners are now tasked with obtaining all the necessary licenses to operate and aim to launch the airline by early 2018. According to Bloomberg, the project also requires VND1 trillion (US$44 million) in investment, of which AirAsia will be responsible for 30%.

While there is certainly potential for a new airline in Vietnam – last year, the country’s market grew 28%, serving 52 million travelers nationwide – Brendan Sobie, chief analyst at the CAPA Center for Aviation, also pointed out that AirAsia faces stiff competition in an already cutthroat market.

“AirAsia is very late to the party in Vietnam and as a result faces huge challenges,” Sobie told Bloomberg. “The market is now well served by two low-cost carriers, VietJet and Jetstar Pacific. The rate of growth will likely slow in the coming years as the market is now more mature.”

Still, AirAsia remains optimistic about its prospects in the country.

"There is great potential for growth in Vietnam," the budget carrier said, according to Nikkei. "This clearly presents an opportunity for another low cast carrier to enter into the market."

[Photo via AIN Online]

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