Vietnam wants it both ways: holding back airline liberalisation as ASEAN open skies stumbles

The Vietnamese government, torn between on the one side encouraging airline and tourism growth and, on the other, retaining nationalist principles, has now apparently forced the delay of AirAsia/VietJet’s JV startup for several months. The carrier is now apparently going to have to find a name that does not include the intruder, AirAsia. Airline liberalisation in Asia Pacific is moving ahead, at both bilateral and multilateral levels, but there are occasional hiccups, as is to be expected across such a wide array of geographies, political systems and economic and aviation development, as this report from the Centre for Asia Pacific Aviation reviews.

Cross border JVs and generic airline branding

The use of common branding for pan-Asian low cost airlines is becoming a highly useful – and, for the archaic airline regulatory system, remarkably sensible – way of expanding liberalisation across the region. By gently challenging the often heavily protected flag carriers in their home bases, the cross border joint venture concept has started to inject much more consumer friendly air services, along with greatly expanded city pair connections. This has proven a real boost for tourism and travel.

And what could be more sensible than generic branding? After all it happens with almost any other international business. But airlines remain rooted in protectionism, as government owned “flag” carriers, often directly or indirectly subsidised – or both – are seen as essential to national pride, even if protecting them restricts tourism and related economic benefits. It looked for a while as if Vietnam, still communist-led, would move to a more relaxed approach. There is still a broadly positive approach to aviation, as its benefits are increasingly recognised.

AirAsia was at the vanguard of the cross-border JV concept in Asia, with joint ventures in Thailand and Indonesia, each branded with the national name as well as the AirAsia brand. Vietnam’s move is a setback, but hopefully not a major barrier.

Vietnam and Korea pushing back against access liberalisation

Meanwhile, government-owned Vietnam Airlines sits on the sidelines not anxious to see liberalisation spread too quickly, as it seeks to expand. Its interests will come before all others.

Jetstar, Qantas’ wholly owned low cost subsidiary, has also been seeking to expand the Jetstar brand widely, with a Singapore entity, as well as a New Zealand subsidiary; Jetstar too has a Vietnamese part-subsidiary, in Ho Chi Minh-based Jetstar Pacific Airlines. The Vietnam authorities have been giving Jetstar an equally hard time too.

But Vietnam is not alone in making life difficult for would-be cross border operations. In 2008, a nationalistic beat-up prevented Singapore’s Tiger Airways from establishing a similar JV in South Korea, in that case with its would-be 51% local partner, the Incheon Metropolitan City Government. There was not a specific rejection, but by the time the dust settled, Tiger decided in Jan-2009 not to proceed.

This is an extract from a longer article that is available for CAPA Members, or by individual purchase. It contains the following analysis sections:

  • China willing, but cautious, allowing foreign LCCs to regional points
  • Asian liberalisation OK, but capital cities protected
  • Ownership and branding

Access the full report now!

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