Malaysian low-cost carrier specialist AirAsia Group has announced it will open a new carrier in Vietnam next year in partnership with local Vietnamese investors.

The group said in a filing to the Bursa Malaysia that through its wholly-owned subsidiary AirAsia Investment (AAI), it had signed a Shareholders Agreement and a Share Subscription Agreement with Gumin Company Ltd, Mr. Tran Trong Kien, and existing operator, Hai Au Aviation JSC on Thursday, March 30.

Under the terms of the shareholders agreement, the joint-venture carrier will be based on Hai Au Aviation (HAA) but will operate under the AirAsia brand.

HAA's paid-up charter capital of VND1 billion dong (USD43,950) will be increased to VND1 trillion (USD43.95 million) as part of the joint venture with AAI holding a 30% stake (30 million shares), Gumin 69.99% (69.99 million shares), and Tran one share. Of the VND1 trillion capitalization, AirAsia will contribute 30% (VND300 billion (USD13.19 million)), with further support provided through loans, advances or other securities. AirAsia will raise internal funding for its portion of the equity.

AAI also signed a new shareholder loan agreement with HAA wherein AAI will loan HAA USD2 million. Separately, Gumin will loan HAA USD4 million.

"The rationale for the Joint Venture is to be an airline in Vietnam which offers an affordable, but high-quality, airline service to Vietnamese and foreign tourists by leveraging the best-in-class LCC business model which is expected to give the Vietnamese population a greater choice as well as spur overall economic growth," AirAsia said. "Given the .. sizeable population of 95 million, there is great potential for growth in Vietnam. This clearly presents an opportunity for another low cast carrier to enter into the market. In addition to that, the middle class population is expected to represent 23% of the total population by 2020, which will further fuel the growth of air travel in Vietnam."

AirAsia added that, subject to obtaining the relevant regulatory approvals, it expects the new carrier to launch by early 2018. Once in service, it will join the rest of AirAsia's growing portfolio of carriers which include AirAsia (Malaysia), AirAsia India, AirAsia Japan (nascent), Indonesia AirAsia, Philippines AirAsia, and Thai AirAsia. Vietnam is already home to two other LCCs namely Jetstar Pacific and VietJetAir.

For its part, Hai Au Aviation is a unit of Thien Minh Group, which is itself owned by Tran Trong Kien. It operates three Cessna (single turboprop) Grand Caravan 208EX amphibians on flights around Vietnam. However, since its launch in late 2014, it has struggled to crack the niche blaming heavy losses on excessive government red tape as well as a lack of legislation governing seaplane operations.