The competitiveness of the domestic aviation market will decrease sharply, since the state owned flag air carrier Vietnam Airlines (VNA) and Jetstar Pacific are no longer rivals.
The procedures of changing the representatives for the state’s ownership at the budget airline Jetstar Pacific (JPA) have been completed, which is synonymous with the basic changes in the situation of the domestic aviation market.
The information that JPA would become a member of the same family with VNA was released one year ago. Since the day the information was released to the day the takeover procedures were completed, there was no any abnormal thing in the operation of the two airlines.
Meanwhile, some people have recalled that chaos was made in 2006, when the airline changed hands for the first time. At that moment, staff lost confidence, flights had few passengers; while creditors chased for debts.
According to the Civil Aviation Authority of Vietnam CAAV, by the nature, JPA is still an airline independent to VNA, while the rights and obligations of the state shareholder at JPA have been transferred intact from the State Capital Investment Corporation (SCIC) to VNA.
CAAV has also pointed out another factor to prove the independence. VNA and JPA have different targeted clients, different operation mechanisms. Especially, JPA is a foreign invested airline, where Qantas holds 27 percent of JPA’s stakes, while the proportion would increase to 30 percent. With the ownership ratio, Qantas has the veto at a certain level. Therefore, CAAV believes that JPA will not be a “small VNA.”
As for VNA, the holding of the controlling stakes at JPA could be seen as the preparatory step to build up the national air carrier into a powerful economic conglomerate, which develops both traditional and budget airline.
Meanwhile, JPA would have the opportunities to access the technical infrastructure items, aircraft maintenance technique, labor force training, and to share the trade systems and clients with VNA. This would help JPA cut down operation expenses and increase turnover.
CAAV has emphasized that with the transfer, JPA would have the chance to improve its financial situation, escape from loss and strive for sustainable development.
Deputy Head of the Central Institute for Economic Management Nguyen Dinh Cung has warned that with the new move, JPA will no longer be a rival of VNA. As the two airlines now don’t have to compete with each other, VNA may control JPA’s decisions, while JPA would have to depend on VNA.
Economists have also said that the shift of JPA from a rival to a partner of VNA, it would lead to many big changes of the domestic aviation market and the policies to be laid out by the management agencies.
In the past, JPA once insisted on demanding for an open legal framework which encourages the development of airlines. It once raised voice to split the petrol supply division from VNA, and create favorable conditions for new airlines to provide some relating services themselves.
It seemed that only JPA dared to criticize VNA when the state owned carrier offered big price discounts which forced other airlines to reduce airfares and suffer from their moves, because of the financial difficulties.
With the existence of JPA, passengers once enjoyed the low cost airfare policy, while the high frequency of JPA helped create noisy promotion campaigns. Both VNA and JPA had to brainstorm to launch competitive tickets in order to occupy the seats on their flights.
While JPA and VNA are no longer rivals, the competition among VietJet Air and Air Mekong would be stiffer, because their rivals would not be VNA and JPA, but a giant with the combined efforts of VNA and JPA.
Meanwhile, an economist has commented that the Competition Administration Department would “have many things to do in an aviation market with increased monopoly.”