HO CHI MINH CITY -- Vietjet Air, the Vietnamese low-cost carrier, and Japan Airlines on Tuesday signed a formal agreement to become strategic partners, aiming to improve the quality of service for customers as well as enhance the corporate value of both airlines.
The agreement will expand the network of the two companies to meet the growing demand for air travel across the region as well as enhancing direct links between Japan and Vietnam.
Japan Airlines has more than 220 aircraft flying to 344 airports in 54 countries. It operates daily direct flights between Tokyo's Narita airport and Ho Chi Minh City and Hanoi, and between Tokyo's Haneda and Ho Chi Minh City. VietJet is set to open its first Japanese route to Osaka early next year.
"We will help Vietjet to develop as a global airline and generate more passengers and cargo traffic between the two countries and open up commercial opportunities on the two airlines' international network," said JAL Executive Vice President Tadashi Fujita.
The first cooperation between the two companies includes code-sharing and the transfer of reward miles accumulated on one airline to the other, beginning next year, with the aim of offering more choice for customers. Increased cooperation, including a frequent flyers partnership, aircraft operations, maintenance, as well as ground handling and training services, will follow later.
"The cooperation promises to bring good results, added value and business opportunities, as both airlines share one important thing in common, we want to provide the best quality and friendly services to our customers," said Vietjet President and Chief Executive Nguyen Thi Phuong Thao at the signing event.
After almost five years of flying, VietJet has grown from having one aircraft and two domestic routes in 2011, to now having a fleet of 48 aircraft and a network spanning 67 routes in Vietnam and the region, including Thailand, Singapore, South Korea, Taiwan, Malaysia, China, Myanmar and Cambodia.
The carrier is targeting 45 domestic routes by 2019, and 36 international routes in 2018, focusing on the Asia Pacific region.
VietJet's modern fleet of Airbus aircraft, at an average of 3.3 years old, with some 180 more on order, is among the youngest and most efficient in the world, operating 350 flights each day and carrying nearly 40 million passengers to date.
A senior executive from Vietjet told the Nikkei Asian Review that the company was trialing "wet lease" practices in the Middle East market, preparing for the right time to launch this service when they received full deliveries from aircraft makers. Wet lease agreements include not only aircraft but also crew, maintenance and insurance. Vietjet has made 200 orders from Airbus and Boeing in the past two years.
VietJet shares have gained more than 50% since the company priced its shares in December 2016, and ranked among the top 10 stocks since it listed on the Ho Chi Minh City Stock Exchange in February.
Its shares have been trading around 126,000 dong ($5.5) during the past four months, after peaking at 136,800 dong in March, making its market capitalization roughly $1.8 billion.
Aviation analysts speculated there was a possibility that the government may soon raise the foreign ownership limit of Vietnam's aviation sector to more than 30%. Vietjet has received shareholder approval for a proposal to lift its foreign ownership limit to 49%, and is awaiting government approval.
After JAL failed to secure a partnership with the country's flagship Vietnam Airlines, a cooperation with Vietjet might be its a gateway to strengthen its profile in the Vietnam market. Vietjet is the fastest-growing low-cost carrier and is on the way to gaining more domestic market share from its state-owned rivals.
Air travel is still a young industry in Vietnam, with air passenger growth at an impressive rate of 17.2% during 2011-2016, among the highest in the region.
The International Air Transport Association notes that Vietnam ranked the third-fastest growing country in the world for air travel, and is expected to rank the fifth-fastest growing by 2035 with 150 million passengers.
International arrivals to Vietnam increased 26% in 2016 from the previous year to over 10 million, while domestic air travelers surpassed 60 million. International travelers are expected to reach 20 million by 2020 and domestic 82 million.
The market has been booming, partly helped by the launch of Vietjet Air. It was founded by Nguyen, 46, a business woman who returned to Vietnam after years studying and working in Russia.
Affordable air travel enables many Vietnamese to move between places more cheaply, quickly and safely compared that in vehicles or on motorbikes. It also encourages more travel in general, creating a higher growth rate for the industry as a whole.