Vietnam Airlines and ’s low-cost carrier Jetstar are negotiating a deal that could elevate Vietnam Airlines to majority shareholder in Jetstar Pacific.
A Jetstar spokeswoman in Singapore acknowledges the two are negotiating an equity deal, but she says nothing has been decided yet. Qantas owns 27% of Ho Chi Minh City-based low-cost carrier Jetstar Pacific, while Vietnam’s State Capital Investment Corp. owns 70% and Saigon Tourist Holding Co. owns the remainder. Under the deal being negotiated, the two Vietnamese partners would sell their stakes to Vietnam Airlines, say industry executives, adding that the negotiations are in the advanced stages.
Vietnam Airlines CEO Pham Ngoc Minh said publicly last month that the airline wanted to have a low-cost carrier. The State Capital Investment Corp., meanwhile, has said publicly it wants to exit Jetstar Pacific.
The Vietnamese low-cost carrier has struggled to make a profit, partly because the Vietnamese government—under the auspices of the Civil Aviation Administration of Vietnam (CAAV)—has been stymieing the carrier. Industry executives say the regulator has been doing this to help Vietnam Airlines remain the dominant airline in the country. The CAAV has taken issue with Jetstar Pacific’s use of the Jetstar brand, which the CAAV says is a foreign brand. Domestic air services should only be marketed under domestic brands, it says.
Another hurdle Jetstar Pacific faces is that many of the airport services—namely aircraft fuel, catering and ground-handling—are controlled by Vietnam Airlines. The two have had an ongoing dispute over fuel, with Vietnam Airlines claiming Jetstar Pacific has not paid its fuel bills on time.
Industry executives say if Vietnam Airlines buys into Jetstar Pacific, it would be a boon for Qantas and Jetstar because Vietnam Airlines would then have a vested interest in seeing Jetstar Pacific succeed. Vietnam Airlines also brings to the table political connections for Qantas.