VietJet Air signs strategic partnership with Malaysia's AirAsia

Apr 8, 2010, 12:31 GMT

Hanoi - Budget airlines VietJet Air and AirAsia on Thursday signed a strategic partnership agreement, and plan to launch a new Vietnam-based budget airline.

VietJet Air has said the new airline will be called VietJet AirAsia, although the routes to be served were not confirmed.

'This should be viewed as a very positive development for Vietnam tourism and the people of Vietnam,' said AirAsia chief executive officer Tony Fernandes.

Malaysian Prime Minister Abdullah Badawi and Vietnamese Deputy Prime Minister Truong Vinh Trong attended the signing at the Sheraton Hanoi Hotel.

VietJet Air is one of the communist country's pioneering private airlines. Malaysia-based budget airline AirAsia operates flights in more than 20 countries.

In February, Vietnam Airlines wrote to Vietnamese Prime Minister Nguyen Tan Dung objecting to AirAsia's acquisition of a 30-per-cent stake in VietJet Air, claiming foreign airlines are not allowed to operate domestic flights within Vietnam.

Deputy Minister of Transport Pham Quy Tieu said the partnership complies with Vietnamese laws, the Vietnam News reported at the time.

Foreign companies can hold up to 30 per cent of Vietnamese airlines. Jetstar Pacific, another private Vietnamese company, is 27-per-cent owned by Australian Qantas Airways Ltd.

Jetstar has also been the target of repeated legal attacks by Vietnam Airlines, which observers attribute to the national carrier's efforts to suppress the competition.

Fernandes insisted that the new company will not compete with Vietnam Airlines. Whereas Vietnam Airlines is a 'full-service' airline, he said, VietJet AirAsia will cater to budget travelers.

Fernandes said the new airline may begin service by August, but did not confirm whether it would serve domestic or international routes.

Thursday's signing ceremony took place across town from the ASEAN summit, an annual gathering of leaders from 10 member countries of the Association of Southeast Asian Nations. Economic integration is a major theme of the summit.

Fernandes said the new airline will benefit South-East Asia's economy. 'Foreign investors see great potential in ASEAN, but we need to improve connectivity,' he said. 'Today is the next step in providing that connectivity.'