Gov’t rejects AirAsia’s Vietnam plans
27 Oct 2007 - The Vietnamese government has rejected AirAsia's plans to open a joint venture no-frills carrier with Vietnam's largest ship-builder after the proposal sparked a debate on commercial rights.Malaysia's AirAsia, the largest budget airline in Southeast Asia, signed a deal with state-owned Vietnam Shipbuilding Industry Group, or Vinashin, in early September to establish the US$30 million low-cost airline, to be named Vina AirAsia.
Vinashin later sent a proposal to the prime minister for approval of the new airline.
However, the government decision, which was signed late last week, stated that “the Prime Minister’s opinion is: Vinashin is not yet [allowed] to participate in the development and business of air transportation.”
Meanwhile the Saigon Times Daily on Thursday quoted an AirAsia executive, who asked not to be named, as saying the Malaysian air-line was pursuing the plan to make Vina AirAsia Vietnam's second budget carrier after Pacific Airlines.
Domestic protest
The plan for the new airline was met with opposition from the country's two major carriers, Vietnam Airlines and Pacific Airlines, who said that the deal would not help develop the country’s air transportation.
Pacific, the country's only budget airline, is undergoing a major overhaul after selling a 30 percent stake to Qantas Airways earlier this year.
Pacific said that Qantas was concerned that the proposed plan could disrupt Vietnam's business environment and threaten the country’s interests as well as Pacific's survival and development, reported Nguoi Lao Dong.
Another concern was that it would serve as a precedent for other foreign airlines to “dodge” current regulations, which ban them from domestic routes.
Pacific Airlines Chief Executive Officer Luong Hoai Nam told the VietnamNet newswire that AirAsia had previously planned to invest in Pacific but its offer was not satisfactory.
Nam added that AirAsia's proposed plan for Pacific would not have created a strong Vietnamese carrier.
Vietnam Airlines, the country's national flag carrier, said it opposed the Vina AirAsia plan on the basis of commercial rights.
Director General and Chairman Nguyen Sy Hung said there are certain commercial rights that not all companies can have.
Vietnam Airlines, for example, has been unable to obtain the rights to fly from Beijing to Moscow, he said.
The US, which promotes the ‘open sky' policy, does not allow foreign airlines to fly domestic routes due to security problems, he added.
Meanwhile, in a dispatch to the Ministry of Transport, the Civil Aviation Administration's deputy chief Luu Thanh Binh suggested that Vietnam prioritize licensing domestic-owned airlines and not allow new airlines invested in by foreign carriers.
Another deputy head, Lai Xuan Thanh, said the administration would only license three more airlines, at most, until 2010.
The establishment of many air carriers in a short period could lead to “unhealthy competition” for human resources and could harm flight safety, he said.
The government considers air transport a “conditioned” business in which operators can only be licensed after the prime minister approves.