VietNamNet Bridge – Jetstar Pacific, the first low-cost airline in Vietnam, will split from Vietnam Airlines, with the State still holding the controlling stake after equitization, a step of the plan to create a competitive aviation market.

Minister of Transport Dinh La Thang said the split will be implemented sooner or later.

The State will sell Jetstar Pacific’s shares to gradually reduce its ownership ratio in the low-cost airline. At this moment, Vietnam Airlines holds approximately 70 percent in Pacific Airlines.

Both Vietnam Airlines and Pacific Airlines are now under the same roof. However, there were two mergers and one split between them in the past.

In 1995, Jetstar Pacific was merged into Vietnam Airlines under the name Pacific Airlines. And in 2012, Jetstar Pacific once again belonged to Vietnam Airlines after the State Capital Investment Corporation (SCIC), which then held 70 percent of Jetstar Pacific, transferred the shares to Vietnam Airlines.

The State then decided to put Pacific Airlines under the management of Vietnam Airlines because it hoped the national flag air carrier would help the low-cost airline recover from a long period of significant losses.

In Vietnam Airlines’ five-year business development plan, Jetstar Pacific is mentioned as an inseparable partner. However, the split was inevitable.

Thang said once Jetstar Pacific leaves Vietnam Airlines, the Vietnamese aviation market will have three air carriers, including the privately owned Vietjet, which will help make the market more competitive and benefit passengers.

However, Thang still does not know when this will occur. In the immediate time, Jetstar Pacific still needs the major financial support from Vietnam Airlines, even though it has been recovering step by step.

“We hope that Jetstar Pacific will stop losses this year. If so, we will consider what to do next,” Thang said.

Tran Dinh Ba, an expert, applauding the decision to split Jetstar Pacific from Vietnam Airlines, commented that once the market becomes more competitive, passengers will get benefits.

Commenting about the Ministry of Transport’s decision to split Jetstar Pacific from Vietnam Airlines, an analyst said the watchdog agency wants to create a more competitive market with more service providers.

However, he noted that it would be not a bad idea if Vietnam Airlines continues to “hold” Jetstar Pacific.

It is a growing trend in Asia that a traditional airline also has a low-cost airline. Qantas, a traditional airline, for example, has its subsidiary – Jetstar – a budget airline.

Meanwhile, Singapore Airlines has recently set up two budget airlines – Silk Air and Scoot, and Thai Airways has regained control over Nok Air and set up Thai Smile.

The analyst noted that the business model that combines traditional and low-cost services will help air carriers better compete with rivals in all market segments, from high-cost, medium- and low-cost.

Vietnam Airlines, in its financial report released before it made its initial public offering in mid-November, also said that it might follow a “dual branding” strategy, i.e., Vietnam Airlines will target high- and medium-income passengers, while Jetstar Pacific will target the low-cost market segment.

The report also showed that Vietnam Airlines will pour more capital into Jetstar Pacific.