Malaysia’s AirAsia again tries to take off in Vietnam

After failing three times, Malaysian discount air carrier AirAsia is once again trying to crack the growing, but well-protected, Vietnamese airline market

Vietnam closely guards its airline market, dominated by state-run Vietnam Airlines and local discount carrier Vietjet Air, but growth potential is such that it is attracting yet another bid by AirAsia, its fourth since 2005.

AirAsia’s latest strategy is to team with Thien Minh Group, a pioneering local travel agency founded in 1994 by Tran Trong Kien, the current chief executive officer. TMG, whose Buffalo Tours is one of the best known travel brands in the country, also operates hotels and a travel booking website. The company also began offering seaplane flights four years ago.

AirAsia CEO Tony Fernandes is said to have first met TMG’s Kien in late 2015. The two have since explored ways to collaborate in Vietnam. Determined not to repeat AirAsia’s previous failed attempts, the two companies carefully studied strategic options as well as how to integrate the companies’ different corporate cultures, Kien said.

The companies plan to jointly set up a low-cost carrier in Vietnam, with the first flight planned for spring 2018. Deploying medium-range passenger aircraft, such as the Airbus A320 and A321, the venture will target domestic and international routes not served by Vietnam Airlines or Vietjet Air.

Kien said there are still niche routes where they see strong demand, such as direct flights between Tokyo and Nha Trang.

Failed attempts

AirAsia first attempted to enter the Vietnamese market in 2005 through a proposal to support Vietnam’s Pacific Airlines, predecessor to Jetstar Pacific Airlines, but lost to rival Qantas Airways. The next bid, in 2007, was a proposed joint venture with a state-owned shipbuilder that was rejected by the government. Its most recent deal, this time to acquire 30% of Vietjet Air in 2010, was signed by the two companies but again grounded by the government.

Vietnam’s heavily protected airline market has so far resisted outside penetration by foreign newcomers.

However, it still remains attractive to AirAisa, which is determined to grab a piece of the market owing to the large growth potential compared to other Southeast Asian countries, according to an executive at a Japanese airline company.