AirAsia's purchase of local airline stake legitimate: official

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It was "quite impulsive" for national carrier Vietnam Airlines to say that Malaysian low-cost airline AirAsia was trying to take advantage of a legal loophole to enter the domestic market, an official has said.

According to Vietnam Airlines, AirAsia's acquisition of a 30 percent stake in local VietJet Air last month was only a move to help the foreign carrier offer domestic flights, which foreign firms are currently barred by law from doing. The national carrier asked the government to prevent a joint-venture between VietJet Air and AirAsia.

But Civil Aviation Administration of Vietnam deputy head Lai Xuan Thanh said AirAsia's move was legitimate as the government allows foreign investors to purchase stakes in local airlines.

"Vietnam is developing its airline industry, and policies have been created to attract capital sources, including foreign investment," Thanh said in an interview published by Lao Dong (Labor) newspaper on Tuesday.

"It's reasonable to encourage airlines to invest capital and aviation technology into Vietnam."

Thanh said as the stake purchase complied with the law, there was no legal basis to roll it back as requested by Vietnam Airlines, Thanh said.

VietJet Air, the first private airline to be licensed in Vietnam, said its joint venture with AirAsia will be named VietJet AirAsia.

Nguyen Duc Tam, VietJet Air CEO, told Thanh Nien with only 30 percent stake, AirAsia will hardly be able to control VietJet Air's business.

"We have our own strengths and strategies and there is no way VietJet Air can be taken over by foreign investors," Tam said.

"VietJet Air managers have a lot of experience in working with foreign investors and we understand that AirAsia is an international company. As a result, we have already made clear and transparent agreements to ensure VietJet Air can operate independently on equality and mutual interest principles."

Foreign investment

The government has set a 30 percent cap on foreign ownership in a local airline. However, Vietnam Airlines said, the regulation does not distinguish foreign airlines from other foreign investors. As a result, foreign carriers like Jetstar and now AirAsia have entered the domestic flights segment in Vietnam, which they are technically not allowed to do. This trend is bound to harm the local industry, the national carrier said.

Vietnam Airlines proposed that the government fix the "loophole."

"The law on aviation was created many years ago, so there can be some regulations that are no longer up-to-date," Thanh said. "Businesses usually propose changes to laws in accordance with the development."

But Thanh said he didn't agree with Vietnam Airlines' assertion that selling stake to a foreign airline was a way of selling the rights to start domestic flights at a cheap price.

"The local airline sector is protected by the 30 percent cap on foreign ownership of a single investor and the 49 percent cap on total foreign investment," he said in the interview.

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