AirAsia sets up low-cost carrier JV in Vietnam

  • Corporate News
  • Friday, 31 Mar 2017

- Reuters

KUALA LUMPUR: AirAsia Bhd is expanding its operations in Southeast Asia, with the proposed low-cost carrier (LCC) joint venture with  Gumin Company Ltd and Hai Au Aviation Joint Stock Company.

AirAsia said on Friday its unit AirAsia Investment Ltd (AAIL) had signed a shareholders agreement and a share subscription agreement with Gumin, Tran Trong Kien and  Hai Au Aviation to establish a LCC in Vietnam.

HAA, which is operating a general aviation business in Vietnam, will form the vehicle for the JV.

Currently, HAA has a paid-up charter capital of one billion Vietnam dong (RM19.4mil) and undertakes to increase its charter capital to one trillion dong (RM194mil) for the JV.

It said AAIL will hold a 30% stake or 30 million shares; Gumin 69.9% (69.99 million shares) and Tran one share.

AAIL and the JV company also signed a new shareholder loan agreement. Under the deal, AAIL will provide a loan of US$2mil (RM8.84mil). Separately, Gumin will provide a US$4mil to the JV Co. 

“The rationale for the JV is to be an airline in Vietnam which offers an affordable but high-quality airline service to Vietnamese and foreign tourists by leveraging the best-in-class LCC business model which is expected to give the Vietnamese population a greater choice as well as spur overall economic growth.

“Improving connectivity in Vietnam would further support an uptick in GDP, providing a boost in multiple industries namely tourism, export related industries, logistics, airport retailers and airline support industries.

“An increase in connectivity will also stimulate demand for air travel amongst the population, opening doors to studies abroad, work related travel and sprouting of new small and medium industries,” it said. 

AirAsia said the JV will require a capitalisation of one trillion dong of which, AirAsia will contribute 30% (300bil dong/RM58.2mil) of the aforesaid capital, with further support provided, at the discretion of the Board of AirAsia by loans, advances or other securities it sees fit. 

“This commitment further cements AirAsia’s belief that this is a key strategic Joint Venture in the region. 

AirAsia will raise internal funding for its portion of the equity,” it said.
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