Vietnam Airlines and Jetstar Airlines merged twice and separated once. In 1995, Jetstar Pacific was merged into Vietnam Airlines for the first time, under the name Pacific Airlines. For the second time in 2012, Vietnam Airlines received nearly 70 percent of the capital of Jetstar Pacific from the State Capital Investment Corporation (SCIC).

In the 5-year development plan of Vietnam Airlines, Jetstar Pacific was supposed to be an inseparable part. However, the separation of the low-cost airline from Vietnam Airlines is only a matter of time.

Transport minister Dinh La Thang said the policy on the separation was made a long time ago and it will take place “sooner or later”. Like a form of privatisation, Jetstar will be separated by selling shares to reduce the percentage of state ownership. Currently the State – represented by Vietnam Airlines – holds nearly 70 percent stake in the low-cost airline.

Thang said after the separation, Vietnam will have at least three airlines, and this will help improve competition in service quality and fares. However, the route map for separation will still be considered because Jetstar Pacific needs significant assistance from Vietnam Airlines. “As planned, this year Jetstar Pacific will no longer incur losses,” the minister said.

As the first budget airline in Vietnam, Jetstar Pacific was established in 1991. Through many changes in shareholders, Jetstar Pacific currently has charter capital of VND1.86 trillion ($89 million), including VND1.26 trillion or 67.83 percent of Vietnam Airlines and 30 percent of Australia’s Qantas.

According to a report from Vietnam Airlines, despite prolonged losses, the return on assets (ROA) of Jetstar Pacific increased from -87 percent to -67 percent.

After the second budget-airline – Vietjet Air – was established, Jetstar’s market share dropped from 17 percent in 2011 to around 15 percent in 2013.

A representative of Vietjet, which holds 26 percent market share in the domestic market, said they do not mind if Jetstar is separated from Vietnam Airlines.

“Competition urges development. If Vietnam has three independent airlines, passengers will have more choices,” a member of the Board of directors of Vietjet said.

Source: Vietnamnet