Existing laws do not allow the government to restrict foreign investment in the airline sector and AirAsia's acquisition of a 30 percent stake in VietJet Air is legitimate, the Transport Ministry said.
The stake transfer on February was carried out in accordance with the Enterprise, Investment and Civil Aviation Laws, and it will not create a new airline in Vietnam, Vietnam Economic Times cited a Transport Ministry's note as saying Thursday.
National carrier Vietnam Airlines last month requested the government to prohibit the move, fearing that a joint-venture between VietJet Air and the Malaysian low-cost airline would hurt the local airline industry.
The Ministry of Transport turned down the request.
It was groundless for Vietnam Airlines to say that AirAsia was the main reason behind the downturn at Malaysia Airlines, or that Thai AirAsia was among factors causing political turmoil in Thailand, the ministry said.
The ministry also said forming low-cost airlines is a development trend in the global aviation industry.
Nguyen Duc Tam, VietJet Air CEO, told Thanh Nien last month that with only a 30 percent stake, AirAsia would hardly be able to control VietJet Air's business.