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Jetsar has denied a report that Jetstar Pacific is on the verge of being taken over by Vietnam Airlines, though it says it would support such a takeover.
The Ho Chi Minh City based budget carrier has struggled since Jetstar parent Qantas bought a minority stake in the airline in 2008 and rebranded it under the Jetstar name, and a report posted Wednesday in the Vietnam News said the carrier would be taken over by Vietnam Airlines as part of a plan to save it from bankruptcy. The report quoted the deputy head of Vietnam’s Civil Aviation Administration.
Jetstar had no response to the report through most of the day Thursday but released a statement late in the day dismissing what it called “erroneous” and “misleading” claims that Jetstar Pacific was about to be absorbed.
“Contrary to reports, no agreement has been formalised and the ownership structure for Jetstar Pacific remains unchanged,” the statement said.
But Jetstar said it continued to support a proposed ownership swap between the Vietnamese State Capital Investment Corporation, the current majority owner, and Vietnam Airlines. Qantas said its 27 per cent stake in the airline would be unaffected by the swap.
While Qantas said Vietnam Airlines would be “welcomed as a partner” in Jetstar Pacific, Vietnam Airlines has often expressed hostility toward the budget carrier, blaming it for undercutting fares and causing both airlines to lose money. Vietnam Airlines remains the dominant carrier in the country’s domestic market, with about 80 per cent of market share compared to Jetstar Pacific’s 17 per cent.
Jetstar Pacific has faced a host of problems in recent years, including safety violations and a government investigation into fuel hedging losses that briefly saw two Qantas executives barred from leaving Vietnam.
The vice president of the AIPA pilots union, which is locked in a long running labour dispute with Qantas, seized on the news Thursday as a cautionary tale about Qantas’s ambitions to expand in Asia, a major point of contention with unions.
“I think you can put whatever spin on it you want but the absorption of the low cost carrier into the mainline says that the business model didn’t work,” Richard Woodward told ABC Radio. “I think it proves that the road to business in Asia is not the golden road that [Qantas CEO] Alan Joyce and his management team have made it out to be.”
Brian Lamprell
says:It is hard to believe the Qantas brands the planned takeover of Jetstar Pacific ” dismissing what it called “erroneous” and “misleading” claims that Jetstar Pacific was about to be absorbed”
The three articles pasted below are from three different Vietnamese Newspapers
Tuoi Tre newspaper 5/12/2010
Potential Jetstar-VNA merger
In other airline news, the Ministry of Finance has proposed a plan to transfer the entire state capital in low-cost carrier Jetstar Pacific (JP) for its business restructuring, said the CAAV.
Accordingly, the budget airline may be forced to merge with the Vietnam Airlines Corp (VNA).
If this plan is adopted, VNA will become by far the largest Vietnamese carrier, with more than 90 percent of domestic market share.
The major stakes in Jetstar are held by the State Capital Investment Corporation (SCIC), with 69.93 percent; other foreign partners with 27 percent; and the Saigontourist Holding Co and Luong Hoai Nam, former general manager of JP, who hold the remainder of the shares..
Jetstar Pacific began in 2004 as Pacific Airlines Co, a carrier in which VNA held an 86 percent state, and was founded by Saigontourist.
After VNA’s capital contribution in Pacific Airlines was transferred to SCIC, Pacific Airlines chose the low-cost airline model and became a rival of VNA in the domestic aviation market.
The turning-point for Pacific Airlines came in 2007, when Australia’s Qantas aviation group acquired a 27 percent stake in Pacific Airlines and changed the carrier’s name to Jetstar Pacific.
The remaining majority stake in Jetstar Pacific was then held by SCIC and Saigontourist.
Currently, together with VNA and JPA, the local aviation market has two other small carriers, namely Air Mekong, with four aircraft; and VietJet Air, which will start flights with its three airplanes in December.
So far, VNA still holds about 80 percent of the local market share while JPA holds over 17 percent, with the very small remaining market share belonging to newly-established carriers.
Both Air Mekong and VietJet Air are recent additions to the national airline scene and operate on a very small scale.
Ceiling airfares blamed for increasing losses
All Vietnamese airlines providing domestic flights, including Vietnam Airlines, Jetstar Pacific Airlines (JPA) and AirMekong, have reported financial losses, while placing the blame on the ceiling airfares set by the Ministry of Finance, according to Sai Gon Tiep Thi newspaper.
Fuel prices have increased by 40 percent so far this year, while the ceiling airfares have been adjusted very slowly.
Managers of the national flag air carrier VNA have said many times that the airline has been incurring losses with domestic flights, and that the losses can be only offset by profits made from international flights.
It has been reported to the CAAV that VNA forecasts a loss of around VND1.8 trillion for domestic flights this year.
JPA incurred a loss of $10 million, or some VND200 billion, in 2010.
The CAAV has recently submitted to the Ministry of Transport two new airfare solutions.
If the proposals are approved by the ministry, the ceiling level would increase by at least 50 percent from the currently applied level.
With an aim to protect consumers, Vietnam is still applying the ceiling airfare mechanism.
Meanwhile, airlines can offer different airfares after considering their business plans so as to obtain reasonable profits.
Experts argue that, while the low ceiling airfare is certainly a factor in the airline’s losses, the companys also need to reconsider their management skills.
Under current circumstances, the airlines which have better management methods would have bigger advantages than those with inferior operations.
For example Air Asia, a Malaysian budget airline, still makes profits while maintaining competitive airfares in comparison with other airlines.
Experts believe that the minimizing of services on flights, plus good expense management skills, have helped make the airline profitable.
A report released in October 2010 showed that the revenue per seat of Air Asia was $4.87, while the expenses were $3.52. Meanwhile, the figures for JPA were $4.84 and $5.07, respectively, according to the Centre For Aviation.
Sai Gon Giao Thong (Communist Party Saigon news)
Sunday, Dec 04, 2011, Posted at: 13:48(GMT+7)
Vietnam Airlines to hold 70 percent stake in Jetstar
The Civil Aviation Administration of Vietnam (CAAV) has announced that from now Vietnam Airlines will hold 70 percent of stake in Jetstar Pacific Airlines, owned by the State Capital Investment Corporation (SCIC).
With this transfer, VNA will hold 90 percent of the market share of the local aviation market.
Jetstar Pacific Airlines, a low-cost carrier, has reported huge losses for the past several years, said CAAV.
The airline losses were mainly caused by skyrocketing fuel prices and fluctuation in the US dollar exchange rate, according to the report. Jetstar Pacific Company’s revenue is 100 percent in Vietnamese dong, while more than 80 percent of its expenditure in US dollars.
Jetstar Pacific was developed from Pacific Airlines in 2004, founded by Saigon Tourist Company and owned by VNA with 86 percent stake. After VNA capital in Pacific Airlines was transferred to SCIC, Pacific Airlines chose the low-cost airline model and became a rival of VNA in the domestic aviation market.
The turning-point for Pacific Airlines came in 2007, when Australia’s Qantas aviation group acquired 27 percent stake in the local carrier, changing its name to Jetstar Pacific. The remaining majority stake in Jetstar Pacific was held by SCIC and Saigon Tourist.
Currently, besides VNA and JPA, the local aviation market has two other smaller carriers namely Air Mekong with four aircrafts and VietJet Air with three airplanes, that will start flights in December.
So far, VNA still holds about 80 percent of the local market share, JPA with over 17 percent and the very small remaining market share belonging to newly-established carriers. Both Air Mekong and VietJet Air are newly-established carriers operating at a very small scale.
Leaders of both the carriers have expressed concern over VNA’s move and dominance of the local market. A manager from Air Mekong said that VNA’s dominance will lead to a market share of up to 90 percent. Competition will therefore decrease and monopoly will increase.
In related news, according to the Civil Aviation Administration of Vietnam (CAAV), Indochina Airlines has officially withdrawn its license because of continued losses.
VIETNAM NEWS Updated December, 07 2011 09:24:55
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Vietnam Airlines to absorb budget carrier Jetstar
HA NOI — 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 Viet Nam (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 had been operated by the State Corporation for Investment and Capital (SCIC) for several years under a low-cost model but was now facing difficulties due to inefficient operation that had caused heavy losses. SCIC, which uses State capital to invest in business, is now the biggest shareholder in Jetstar Pacific.
Restructuring the company was 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 was for the airline to transfer its capital to Vietnam Airlines, said Thang, adding that the timing of the merger would be decided by the Government.
Vietnam Airlines was the top carrier in the country with an 80 per cent market share, while Jetstar is second with about 17 per cent. Upon finalisation of the merger, Vietnam Airlines market share would increase to nearly 100 per cent, Thang said.
This would be the first merger in the country’s history of aviation, he said.
He acknowledged that Vietnam Airlines would gain a monopoly in the local market with the merger but said that even without the merger, the State owned airline already had a lion’s share of the market.
However, he affirmed that the merger was not bad for the domestic airline market because the Government and the Ministry of Transport would continue to expand the market by allowing more private airlines to compete. He added that Vietjet Air began operating this month.
According to the Sai Gon Tiep Thi newspaper, Vietnam Airlines will have a 70 per cent stake in Pacific Airlines from the SCIC. Therefore, once taking over the 70 per cent of SCIC, Vietnam Airlines will hold a controlling stake in the budget airline.
Established in 2004, Pacific Airlines was founded by Saigontourist. Vietnam Airlines has an 86 per cent stake in the carrier. In 2007, Australian flag carrier Qantas acquired a 27 per cent stake in the carrier. Pacific Airlines changed its name to Jetstar Pacific and the remaining majority stake in Jestar Pacific was held by Vietnamese partners (SCIC and Saigontourist).
Fierce competition in the domestic aviation market has become a burning issue since 2008. Jetstar Pacific began applying different fare levels, some of which were lower than the ceiling levels charged by Vietnam Airlines. This forced Vietnam Airlines to change its pricing mechanism to compete with Jetstar Pacific.
Due to increased competition, airlines have been forced to lower fares despite rising fuel prices, resulting in their huge losses. Jetstar Pacific was reportedly taking on heavy losses, partly due to fuel hedging.
Losses even led to an investigation after which the former general manager of Jetstar Pacific, Luong Hoai Nam, was arrested while two foreign directors were prohibited to leave the country.
After that, SCIC, the largest shareholder, appointed Le Song Lai, then deputy general director of SCIC, to be the new general manager of Jetstar Pacific. However, Jetstar Pacific still incurred losses over the last year on domestic air routes.— VNS
WAHATI
says:READ ALL ABOVE, NEED TO TELL ALAN JOYCE:
1. STOP LYING TO AUSTRALIAN PEOPLE, WE DO READ PAPERS OTHER THAN YOUR WORDS.
2. LOW WAGES IS YOUR YOUR CURE? NO, EVEN YOU PUT IT IN VIETNAM.
3. LOW FARE IS YOUR CURE? NO, EVEN YOU PUT IT IN VIETNAM.
4. TRY TO PUT AN LCC TO AN LOW PAY ASIAN COUNTRY AND RUB THEIR OWN AIRLINES? NO ONE IS SO STUPID TO LET YOU DO THAT.
5. YOUR HIGHLY PAID MANAGEMENT TEAM ARE MAKING BIG LOSS (FUEL HEDGING IN THIS CASE), YOU GUYS ARE THE ONES DESERVE PAY CUTS, NOT FRONT LINE EMPLOYEES.
6. YOUR HIGHLY PAID MANAGEMENT TEAM DO NOT GET THE PRODUCT RIGHT FOR QANTAS, DO NOT BLAME AUSTRALIAN PUBLIC NOT FLYING WITH YOU WHEN TRAVELING OVERSEAS. EMIRATE’S FARE IS NOT CHEAPER THAN YOU. AND REMEMBER THEY PAY THE HIGHEST IN THE INDUSTRY TO THEIR PILOTS AND CREW. AND THEY MAKE MONEY.
7. HOPE YOU LEARN ONE DAY