Vietnam Air plans domestic carrier as budget rival gains ground

[HO CHI MINH] Vietnam Airlines Corp plans to split off a domestic-service unit to create a short-haul carrier as it loses ground to a low-cost rival.

The new airline would be formed by restructuring Vietnam Air Services Co, known as Vasco, Pham Ngoc Minh, chief executive officer of the national carrier, said in an interview Tuesday. Vietnam Air is in the midst of seeking approval from the transport ministry for the new carrier aimed at business travelers, Minh said.

The move comes amid market-share gains by low-cost carrier VietJet Aviation Joint Stock Co, which CAPA Centre for Aviation says will probably surpass Vietnam Airlines as the nation's biggest domestic carrier this year. Vietnam is expected to rank among the world's 10 fastest-growing aviation markets in the next two decades, according to the International Air Transport Association.

Under the proposal, Vietnam Airlines would hold 51 per cent of the venture, while Techcombank, a shareholder in the national carrier, would have a 49 per cent stake, Minh said.

Techcombank will make an initial investment of 147 billion dong (S$9.4 million) in the venture, while Vietnam Airlines will provide the aircraft and other Vasco assets, he said.

The new carrier would operate five ATR short-range aircraft starting in the second quarter and generate total revenue of 2 trillion dong in the next three years, the Saigon Times reported Monday, citing a proposal submitted to the transportation ministry.

Vietnam Airlines owns 70 per cent of budget carrier, Jetstar Pacific Airlines, with Qantas Airways Ltd. holding the remaining 30 per cent.

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