The Civil Aviation Administration of Vietnam (CAAV) has announced that from now Vietnam Airlines will hold 70 percent of stake in Jetstar Pacific Airlines, owned by the State Capital Investment Corporation (SCIC).
With this transfer, VNA will hold 90 percent of the market share of the local aviation market.
Jetstar Pacific Airlines, a low-cost carrier, has reported huge losses for the past several years, said CAAV.
The airline losses were mainly caused by skyrocketing fuel prices and fluctuation in the US dollar exchange rate, according to the report. Jetstar Pacific Company’s revenue is 100 percent in Vietnamese dong, while more than 80 percent of its expenditure in US dollars.
Jetstar Pacific was developed from Pacific Airlines in 2004, founded by Saigon Tourist Company and owned by VNA with 86 percent stake. After VNA capital in Pacific Airlines was transferred to SCIC, Pacific Airlines chose the low-cost airline model and became a rival of VNA in the domestic aviation market.
The turning-point for Pacific Airlines came in 2007, when Australia’s Qantas aviation group acquired 27 percent stake in the local carrier, changing its name to Jetstar Pacific. The remaining majority stake in Jetstar Pacific was held by SCIC and Saigon Tourist.
Currently, besides VNA and JPA, the local aviation market has two other smaller carriers namely Air Mekong with four aircrafts and VietJet Air with three airplanes, that will start flights in December.
So far, VNA
still holds about 80 percent of the local market share, JPA with over 17
percent and the very small remaining market share belonging to
newly-established carriers. Both Air Mekong and VietJet Air are
newly-established carriers operating at a very small scale.
Leaders of both the carriers have expressed concern over VNA's move and dominance of the local market. A manager from Air Mekong said that VNA's dominance will lead to a market share of up to 90 percent. Competition will therefore decrease and monopoly will increase.
In related news, according to the Civil Aviation Administration of Vietnam (CAAV), Indochina Airlines has officially withdrawn its license because of continued losses.