Vietnam Airlines protests AirAsia joint venture

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National carrier Vietnam Airlines has requested the government to prevent Malaysian low-cost airline AirAsia from forming a new budget joint-venture in Vietnam.

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 Malaysian company enter the domestic market.

As it is difficult to expand their business to overseas markets, foreign carriers often try to invest in a local carrier, Vietnam Airlines said in a letter to Prime Minister Nguyen Tan Dung.

Although the government has set a 30 percent cap on foreign ownership in a local airline, foreign investors like Jetstar and now AirAsia have taken advantage of the policy to enter the domestic flights segment in Vietnam, which foreign carriers are technically not allowed to do. This trend is bound to harm the local industry, the national carrier said.

VietJet Air, the first private airline to be licensed in Vietnam, said last month the Ministry of Transport has approved its joint venture with AirAsia.

AirAsia said last month that the new budget airline, VietJet AirAsia, will operate both international and domestic flights starting May.

Analysts said AirAsia's investment in VietJet Air would help the local airline launch its service soon. VietJet Air received its license in 2007 but has delayed its first commercial flight many times since.

Vietjet AirAsia, if finally established, will compete directly with Jetstar Pacific, the first low-cost airline in the country.

Jetstar Pacific has not raised any objection to the co-operation between VietJet and AirAsia.

Qantas Airways Ltd., Australia's largest airline, holds a 27 percent stake in Jetstar Pacific.

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