VIETNAM-Low-cost airline Jetstar Pacific will merge with national flag carrier Vietnam Airlines in the near future, according to deputy head of the Civil Aviation Administration of Vietnam (CAAV) Dinh Viet Thang.
The move is considered the most feasible plan to save the carrier from bankruptcy.
The Ministry of Finance and the Ministry of Transport have agreed to the move, which is awaiting approval from the Prime Minister, said Thang during a briefing at the Ministry of Transport late last week.
Thang said that Jetstar Pacific was operated by the State Corporation for Investment and Capital (SCIC) for several years under a low-cost model but is now facing difficulties due to inefficient operation that has caused heavy losses. SCIC, which uses State capital to invest in business, is now the biggest shareholder in Jetstar Pacific.
Restructuring the company is essential, he said.
The Finance Ministry has kept the Prime Minister informed about the merger and participants at some recent Government meetings have outlined a number of different plans. The most effective plan is for the airline to transfer its capital to Vietnam Airlines, said Thang, adding that the timing of the merger will be decided by the Government.
Vietnam Airlines is the top carrier in the country with an 80 percent market share, while Jetstar is second with about 17 percent. Upon finalisation of the merger, Vietnam Airlines market share will increase to nearly 100 percent, Thang said.
This will be the first merger in the country's history of aviation, he said.
He acknowledged that Vietnam Airlines will gain a monopoly in the local market with the merger but said that even without the merger, the State owned airline already has a lion's share of the market.
However, he affirmed that the merger is not bad for the domestic airline market because the Government and the Ministry of Transport will continue to expand the market by allowing more private airlines to compete. He added that Vietjet Air began operating this month.
The move is considered the most feasible plan to save the carrier from bankruptcy.
The Ministry of Finance and the Ministry of Transport have agreed to the move, which is awaiting approval from the Prime Minister, said Thang during a briefing at the Ministry of Transport late last week.
Thang said that Jetstar Pacific was operated by the State Corporation for Investment and Capital (SCIC) for several years under a low-cost model but is now facing difficulties due to inefficient operation that has caused heavy losses. SCIC, which uses State capital to invest in business, is now the biggest shareholder in Jetstar Pacific.
Restructuring the company is essential, he said.
The Finance Ministry has kept the Prime Minister informed about the merger and participants at some recent Government meetings have outlined a number of different plans. The most effective plan is for the airline to transfer its capital to Vietnam Airlines, said Thang, adding that the timing of the merger will be decided by the Government.
Vietnam Airlines is the top carrier in the country with an 80 percent market share, while Jetstar is second with about 17 percent. Upon finalisation of the merger, Vietnam Airlines market share will increase to nearly 100 percent, Thang said.
This will be the first merger in the country's history of aviation, he said.
He acknowledged that Vietnam Airlines will gain a monopoly in the local market with the merger but said that even without the merger, the State owned airline already has a lion's share of the market.
However, he affirmed that the merger is not bad for the domestic airline market because the Government and the Ministry of Transport will continue to expand the market by allowing more private airlines to compete. He added that Vietjet Air began operating this month.
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