Bureaucratic hurdles have scuppered Malaysian low-cost carrier AirAsia's plans to bring its franchise to Vietnam via a joint venture with start-up airline VietJet Aviation.

AirAsia's agreement in February 2010 to buy a 30% stake in VietJet and begin low-cost domestic and international services has lapsed and will not be renewed, the airline said in a stock-exchange statement.

Regulatory approval from the Vietnamese government for VietJet to use the AirAsia brand across its commercial operations was not forthcoming, among other issues, it added.

"As those conditions are fundamental for the successful conduct of the business model for the intended joint venture, the company has decided to allow the joint venture to lapse with immediate effect," added AirAsia.

The proposed joint venture ran into hurdles virtually from the start. The Civil Aviation Administration of Vietnam has disallowed it from operating under the proposed VietJet AirAsia label. National carrier Vietnam Airlines opposed a proposal to use the name VietAir, given that it had a subsidiary with the same name.

Industry sources said there was also domestic political and business opposition to allowing foreign companies to invest in the country's airline market.

AirAsia has affiliates in Thailand and Indonesia, and a stake in Malaysia-based long-haul low-cost carrier AirAsia X. The airline has also inked agreements to begin low-cost operations in the Philippines and Japan with joint-venture partners.

Source: Flight International