AirAsia's Vietnam plan faces stiff competition.

Kuala Lumpur-based AirAsia is having another tilt at a joint venture in Vietnam that will pit it against the well-established operations of Jetstar Pacific and VIetJet. 

Wholly-owned AirAsia subsidiary AirAsia Investment Limited signed an agreement on March 30 week with Gumin Company Limited,  the  Hai Au Aviation Joint Stock Company and their owner Tran Trong Kien to establish a budget carrier in the fast-growing market.

The budget carrier will own 30 per cent of the joint venture which plans to start flying in 2018, subject to Vietnam's often difficult regulatory process.

Vietnam’s aviation market has been growing at a healthy clip and Bloomberg estimates the growth is three times the rate in other Southeast Asian countries.

Government statistics show there were 52.2 million air travellers in Vietnam in 2016, an increase of 29 per cent year-on-year, with 28 million flying domestically. The International Air Transport Association has predicted there will be 112 million new passengers in Vietnam over the next two decades.

This is AirAsia’s third attempt to get a foothold in Vietnam as part of its strategy to establish an Asian network and the CAPA Centre for Aviation believes being late to the market will make the job more difficult.  

“ AirAsia was initially partnered with VietJet Air but the partnership was dissolved prior to VietJet commencing operations in late 2011,’’ CAPA said.

“The market has since more than doubled in size, and Vietnam has emerged as Southeast Asia’s fastest growing market. 

“While there is further growth potential, the LCC incumbents VietJet and Jetstar Pacific have first mover advantage, and infrastructure constraints could make it difficult for any new entrant to establish a significant presence.

"AirAsia will also need to overcome regulatory hurdles.”

Known for publicity stunts involving bikini-clad girls, VietJet launched in 2011 as Vietnam’s first privately owned “new age" carrier and publicly listed earlier this year.

It operates almost 40 Airbus A320 and A321 aircraft to about 60 domestic and international destinations with ports in Thailand, Singapore, South Korea, Taiwan, Malaysia, China, Japan, Hong Kong and Myanmar. 

It hopes to have a fleet of 200 aircraft by 2023 and last year placed an order with Boeing for 100 737 MAX jets with a list price of $US11.3 billion.

Jetstar Pacific launched in 2008 and now flies to 16 domestic and international destinations with a  fleet of 10 Airbus A320 aircraft. It has plans to expand its fleet to 30 A320s.

Australia’s Jetstar Group owns 30 per cent of the airline while Vietnam Airlines, which is also a codeshare partner with Jetstar,  owns the remainder.

Jetstar’s Australian long-haul operations will move in May to reconnect with its sister airline when it resumes flights to Ho Chi Minh City.

Starting May 10, Jetstar will operate Boeing 787 Dreamliner services three times weekly from Melbourne and four times weekly from Sydney.

Jetstar Group chief executive Jayne Hrdlicka in January described Vietnam as one of the fastest growing holiday destinations in South East Asia.

“Vietnam has the potential to become as popular as Bali or Thailand for Australian travellers,” Hrdlicka said. “Vietnam is well known for its rich culture, vibrant cities, beaches and cuisine, and travellers can take advantage of the wide range of experiences the region has to offer.

“We expect our low fares and direct flights will generate even more demand for holidays to Vietnam.’’

Jetstar International first flew to Vietnam from Australia a decade ago.