Qantas Calls Time On Vietnam Airlines Joint Venture

Qantas is close to wrapping up its long-running joint venture with Vietnam Airlines. Both airlines joined forces in 2007 to launch Jetstar Pacific, getting in early on Vietnam’s low-cost airline boom. But in June, Qantas said it would quit the joint venture, selling out for what’s being described as a bargain-basement price. Now, Qantas is moving close to sealing the exit deal.

Qantas has called time on its Jetstar Pacific joint venture with Vietnam Airlines. Photo: Getty Images

After 13 years, Qantas close to ending its joint venture with Vietnam Airlines

In 2007, Qantas paid the Vietnamese Government US$30 million for an 18% stake in Vietnam’s Pacific Airlines. That stake increased to 30% in 2010. In 2008, Pacific Airlines changed its name to Jetstar Pacific to capitalize on Jetstar’s growing brand awareness across Asia.

But over the following decade, Jetstar Pacific failed to gain traction. This was despite a huge surge in demand in Vietnam. Until this year, Vietnam was one of the fastest growing and best performing aviation markets globally.

The problem was two-fold. Qantas was hobbled by its joint venture with the Vietnamese Government via the wholly government-owned Vietnam Airlines. Government-owned airlines are typically slow to respond to opportunities and threats and riddled with corporate inertia. Vietnam Airlines is no exception.

Secondly, private airlines flooded the market in Vietnam. While Vietnam Airlines was slow to respond, upstart new carriers like Bamboo Airways and VietJet were quick to seize opportunities. But they also flooded the market with capacity.

Upstart new low-cost airlines like VietJet have made life difficult for Jetstar Pacific. Photo: Getty Images

Qantas struggled with joint venture long before the 2020 travel downturn

Since the joint venture began, it has struggled to make money. This year, when the travel downturn began to bite, Qantas decided it was time to exit. In June, Qantas confirmed it would quit the joint venture, subject to government approvals, to “focus on our other airlines.

“We’ve been in discussions with Vietnam Airlines for some time about the challenges facing Jetstar Pacific, which have obviously intensified through the COVID crisis,” Gareth Evans, Chief Executive Officer at Jetstar, said in June.

Four months down the track, it seems the government authorities have given the joint venture dissolution the thumbs up, and Qantas is set to hand over its 30% stake to Vietnam Airlines.

Street Deal Asia reports Vietnam Airlines’ spokesperson, Dang Anh Tuan saying last week;

“Vietnam Airlines has reported to relevant authorities and is working on some procedures to prepare for an expected official announcement by the end of October.”

The same media report describes the transaction as a “giveaway deal” for Vietnam Airlines.

Reports suggest Vietnam Airlines is picking up Qantas’ stake in Jetstar Pacific cheaply. Photo: Getty Images

Qantas has always found Vietnam a tough market to crack

Despite a large Vietnamese diaspora in Australia and significant business and leisure traffic between the two countries, Qantas has always found Vietnam a tough market to crack.

Its former international services to Vietnam were relatively short-lived and exited some time ago, leaving direct flights between the two countries to Vietnam Airlines.

And while Qantas’ Jetstar brand has proved wildly successful elsewhere, Vietnam’s domestic airline market did not provide the riches they’d hoped for. Jetstar Pacific lost $47.4 million in the eight months to August, though in fairness, this is not a normal year.

Meanwhile, following the announcement the joint venture was ending, Vietnam Airlines said Jetstar Pacific would get rebranded back to Pacific Airlines. That’s taking place now.

What do you think? Was Qantas wrong to enter into the joint venture in the first place? And, having done so, why didn’t the joint venture turn into a commercial success? Post a comment and let us know.

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