AirAsia lands Vietnam joint venture

AirAsia is finally establishing a base in Vietnam through a joint venture with VietJet Air, four years after announcing plans to enter one of Southeast Asia's most talked-about aviation markets.

Under the terms of the agreement, the Malaysian low-cost carrier has taken a 30% stake in Vietnamese upstart VietJet for Vnd180 billion ($9.5 million) through its wholly owned subsidiary AA International. Sovico Holdings, a diversified Vietnamese conglomerate with finance, power generation and real estate businesses, owns 51% and Sovico's chairman, Nguyen Thanh Hung, owns 19%. The new joint venture airline was approved by local regulators on February 9 and will be called VietJet AirAsia.

According to filings with Bursa Malaysia, AirAsia will provide technical, operational and commercial support to its new Vietnamese division and said the airline will launch international and domestic services by June. In a statement VietJet Air said it brought "Vietnamese market insights" to the deal.

Little is known about the Malaysian airline's new partner. According to its website, VietJet Air was launched in 2007 and was to have begun operations in 2009. However, the airline continues to exist only on paper.

A representative of AirAsia said VietJet AirAsia will operate a fleet of Airbus A320s, with three aircraft scheduled to be delivered every year for the next five years.

Vietnam is a sought-after airline market. The International Air Transport Association reported that total air passenger traffic in the country was 12.5 million in 2007, the most recent number available from the industry body, and estimated that the market would grow at an annual rate of 7.7% through 2011.