AirAsia initiates third attempt to launch Vietnamese JV; Vietnam maybe overburdened with LCCs

The AirAsia Group has forged a new joint venture in Vietnam, marking its third attempt to establish a Vietnamese affiliate. AirAsia was initially partnered with VietJet Air but the partnership was dissolved prior to VietJet commencing operations in late 2011.

The market has since more than doubled in size, and Vietnam has emerged as Southeast Asia's fastest growing market. While there is further growth potential, the LCC incumbents VietJet and Jetstar Pacific have first mover advantage, and infrastructure constraints could make it difficult for any new entrant to establish a significant presence. AirAsia will also need to overcome regulatory hurdles.

Vietnam is the second largest market in Southeast Asia without an AirAsia affiliate - after Singapore, where the group has been able to develop a sizeable presence with a virtual hub. Vietnam is a market AirAsia strategically cannot avoid, but the group is late to the party and faces some of the same obstacles that have impacted its performance in the Philippines.