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The Vietnam News

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AirAsia expanding to Vietnam, Philippines

Having established a firm foothold in Malaysia, Thailand and Indonesia, budget carrier AirAsia (AA) is moving to branch out into Vietnam and the Philippines with the creation of sister airlines in those countries. Southeast Asia's largest low-cost carrier is making inroads into the two growing countries for their mass-market fundamentals while offering strategic bases to cover the region's critical air hubs.

The airline was launched five years ago and has carried over 40 million passengers over 86 routes across 11 countries. AirAsia aspires to become the biggest airline in the region early in the next decade, surpassing major regional players like Singapore Airlines. ''I think with those five countries, we can virtually tap most of Asean,'' AA group chief executive Tony Fernandes told the Bangkok Post.

But the airline does not intend to establish itself in the small Asean states due to the limited market sizes. ''If we had Vietnam and the Philippines, I think that will be it for us,'' he noted. ''Our strategy is to become an Asean airline.'' AA has signed a letter of intent with the Vietnam shipbuilding Industry Group (Vinashin), a state-owned agency. The deal would see the establishment of a low-cost carrier (LCC) in Vietnam in the form of a joint venture like those in Thailand and Indonesia established more than three-years ago.

However, the plan to set up the airline, tentatively known as Vina AirAsia, to operate both domestic and internationally, is facing opposition from two existing operators _ Vietnam Airlines and Pacific Airlines. Current Vietnamese regulations restrict access of the two airlines. Only Vietnam Airlines is allowed to operate internationally and Vietnamese authorities have not yet shown any sign to change that. The present maximum foreign ownership in an airline in Vietnam is 30%.

Fernandes said the bid to set up its Vietnamese branch rested on Vinashin. ''It is for our partner to talk to the authorities. We are a very patient company. We've been through many problems (like this) before.'' AA does not expect the Vietnamese offshoot to take to the skies until 2009. It plans to use capital Hanoi as its base in the communist-ruled country. The carrier is also eyeing to set up an AirAsia airline in the Philippines, but the plan to establish a presence there remains sketchy. ''I can't tell you how soon we can set up there,'' he said. ''Really, right now my plan is to deliver Thailand and Indonesia, making sure they are profitable and well.''

He insisted that the expansion of AA, though its origin was in Malaysia, is part of a bid to build an brand that spans across all of Asean. ''I believe we should not be so nationalist any more [now that] the future of our countries rest a lot on Asean integration. If we don't integrate, then we will be trampled on by China and India. Our country individually is not strong enough, but if we act as a group, Asean is very strong.,'' he said. The airline group has an order book of 150 Airbus A320s plus 50 options for its short-haul operations in the region.

The Bangkok Post - November 14, 2007.