Jetstar Pacific now with 20 percent market share in Vietnam
HANOI – Vietnam’s minister of finance Vu Van Ninh has told the National Assembly Standing Committee of the troubles being faced by Jetstar Pacific, which is 27 percent owned by Qantas.
Ninh said that Pacific Airlines, a subsidiary of Vietnam Airlines, had been established in 1991 and ran at a loss until 2005.
“It would have gone bankrupt but the government wanted to develop a competitive airline market,” he said.
“Thus it decided to restructure the airline. Qantas assessed the value of the airline and bought a stake to set up the low-cost Jetstar Pacific Airlines.
“Since then, Jetstar Pacific had faced many difficulties which it tried to overcome by cutting expenses and reducing salaries and the number of foreign workers, but because of its petrol price hedging the airline had not made a profit,” Ninh said.
“In the hedging contracts signed in 2008, Jetstar Pacific agreed to buy fuel at US$120-130 per barrel in the international market in case the price continued going up, but the next year the price dropped.”
Three Jetstar Pacific executives are assisting Vietnamese authorities with investigations into the fuel losses. Fuel hedging losses in the 2008-2009 financial year are estimated at US$31 million.
Previously, Vietnam’s Tuoi Tre newspaper quoted state investigators saying the three Jetstar employees ignored a board resolution clearing them to buy aviation fuel futures only until the end of 2008. They continued their activity until May 2009.
Following the launch of the enquiry, Qantas CEO Alan Joyce said the executives had done nothing wrong and predicted the case would not harm Jetstar’s business operations in Vietnam. Qantas has the right to lift its stake in Jetstar Pacific to 30 percent this year.
"The losses that were incurred were a part of global business risk," Joyce said.
Among other problems faced by Jetstar Pacific, relentless lobbying by Vietnam Airlines encouraged the country’s Civil Aviation Authority to order it not to use “Jet” and the orange star on aircraft livery.
Jetstar Pacific now has six aircraft with 20 percent of market share, Ninh said.
Ian Jarrett
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