Vietnam Airlines and Jetstar Partner to Establish LCC in Vietnam

Vietnam Airlines and Australia’s Qantas Group (parent company of the Jetstar Group) have entered into a new partnership arrangement for the new Vietnam-based low cost carrier named Jetstar Pacific Airlines (JPA).

The state-owned capital in Jetstar Pacific Airlines, previously managed by Vietnam State Capital Investment Corporation (SCIC), has now been transferred to Vietnam Airlines according to the Prime Minister’s Decision No. 94/QD-TTg, which came into effect on 16 January 2012.

Vietnam Airlines inherits all the rights and obligations of a state shareholder in JPA and becomes the largest shareholder of 69.93% stake. Australia’s Qantas Group is the second largest shareholder with 27% capital ratio. Vietnam Airlines is selling 3% of its stake in Jetstar Pacific to the Qantas Group in line with a long term commitment and following the existing agreement signed between SCIC and Qantas Airways with the Government’s approval.

In the JPA’s shareholder meeting held on Tuesday in Hanoi, its members jointly agreed on the low fare airline’s strategic development plan and measures needed to secure JPA’s sustainable and efficient growth.

According to this, JPA’s board of directors continues to operate and develop JPA into a leading low cost carrier in Vietnam. Central to this is the development of a two brand strategy with a full service carrier (Vietnam Airlines) and low fare carrier (Jetstar Pacific).

The focus will be on serving domestic and international routes. Through the new partnership, Jetstar Pacific will receive an initial capital injection of A$25 million. This will be directed towards fleet renewal, with the carrier’s current Boeing 737s replaced with new A320s from mid-2012. The shareholders support Jetstar Pacific’s fleet to grow to 15 A320s within the next few years.

Vietnam Airlines President and CEO – Dr. Pham Ngoc Minh saidm “We are glad to reach consensus with JPA’s shareholders in developing the carrier into a successful business model which combines low fare advantages with Vietnam Airlines’ expertise as the Vietnam’s flagship carrier. We strongly believe that the revitalization of JPA will generate substantial benefits to its customers and contribute to boost Vietnam civil air transportation market as the whole.”

Jetstar Group CEO, Bruce Buchanan, added, “We welcome Vietnam Airlines as our new partner in Jetstar Pacific. We are confident this partnership between a low fares carrier and a full service airline can replicate the success of the two brand strategy used by Qantas and Jetstar in Australia. Across Asia, we’re seeing the positive impacts of introducing a new generation of customers to air travel, including Vietnam where the penetration of low cost carriers is still relatively low. The strength of our low cost model and the tremendous potential for growth provide a unique opportunity for Jetstar in Vietnam. Our partnership with Vietnam Airlines will help develop this.”

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