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Vietnam Airlines to take full ownership of Jetstar Pacific
June 19th 2020
Qantas confirmed this week it planned to offload its 30% shareholding in Jetstar Pacific, terminating a 13-year investment in the Vietnam-based airline. Read More »
In addition to ending the Qantas Group’s involvement in the airline, the Jetstar Pacific name will disappear from the Vietnam domestic market with the LCC to be rebranded as Pacific Airlines, the carrier's original name when established in 1991.
The restructured airline will have a new logo and livery inspired by the brand colours and design of its 70% owner, Vietnam Airlines. It also will switch its reservation systems from Navitaire to Sabre to streamline bookings, network and customer functions with the Vietnamese flag carrier.
Jetstar group CEO, Gareth Evans, said this week the time was right for Jetstar Pacific to "take advantage of the strength and scale of Vietnam Airlines in its home market".
“We have been in discussions with Vietnam Airlines for some time about the challenges facing Jetstar Pacific, which have obviously intensified since the onset of the COVID crisis," Evans said.
"Subject to the necessary approvals, our intention is to cease being a shareholder in the coming months so we can focus on our other airlines. The changes to the brand in Vietnam announced today are part of that."
Vietnam Airlines executive vice president and Pacific Airlines chairman, Trinh Hong Quang, said the LCC sector would have a "certain role in supporting the return of travel" as coronavirus restrictions eased.
"By streamlining functions, Pacific Airlines can remain competitive, inherit many of the efficiencies of Vietnam Airlines and continue to offer the low fares our customers expect," Quang said in a statement.
"We are optimistic the dual brand strategy will leverage the brand and resources of Vietnam Airlines and by undergoing innovation and improvisation, we will continue to see the Vietnam Airlines Group maintain its position of leadership in the Vietnamese domestic market now and into the future.”
Jetstar Pacific has a fleet of eight A320ceo aircraft configured with 180 seats in an all-economy cabin, according to the airline's website. In a highly competitive market, the airline is small compared with its competitors. Rival LCC, Vietjet Air, has upwards of 75 aircraft in its fleet with orders for more than 300 on the books, while recently established Bamboo Airlines made its first flight in 2019 and already operates wide-body aircraft. Vietnam Airlines has about 100 planes and has been the dominant player in the market.
All have been hit hard by the coronavirus, with Vietnam's government estimating passenger numbers would fall 46%, to 43 million, in calendar 2020, compared with the prior year.
It was reported this week that Vietnam’s transport minister Nguyen Van The, said the country would temporarily halt approvals for new airlines until the aviation market had recovered from COVID-19.
Qantas first invested in what was then known as Pacific Airlines in 2007, when it paid US$30 million for an 18% holding, with the Vietnam government's State Capital Investment Corporation (SCIC) owning the rest. The airline was rebranded Jetstar Pacific in 2008 and restructured as an LCC.
In 2010, two Qantas group executives working in senior roles at Jetstar Pacific were prevented from leaving Vietnam for about six months as authorities investigated fuel hedging losses. No charges were laid and the pair eventually was allowed to return to Australia.
The LCC's shareholding was restructured in 2012 with the SCIC offloading its equity to Vietnam Airlines. As a result, the Vietnamese flag carrier controlled about 70% of Jetstar Pacific and Qantas 30%.
Qantas does not break out the performance of the individual Jetstar operations in its financial results. In the 2019-20 interim report published in February, Qantas said of its Asian-based Jetstar affiliates: "Jetstar Japan remained profitable, while Jetstar Vietnam faced increased competition and Jetstar Asia faced ongoing challenges from airport charges".
In May, Qantas group CEO, Alan Joyce, described Jetstar Pacific as "struggling" even before the onset of the coronavirus pandemic.
The eventual sale of its 30% stake to Vietnam Airlines will leave Qantas with two LCC franchises in the Asia-Pacific: Singapore-based Jetstar Asia and Jetstar Japan.
Qantas holds 49% in Jetstar Asia, with Singapore’s Westbrook Investments the majority shareholder (51%). Jetstar Japan is a joint venture between Qantas, Japan Airlines (JAL), Mitsubishi Corporation and Century Tokyo Leasing Corporation.
The Australian airline group and China Eastern Airlines (CEA) had hoped to establish Jetstar Hong Kong in 2012. After three years of work, the application for an operating licence was rejected by Hong Kong regulators in 2015 and the project abandoned.
