Vingroup Grounds Aviation Unit Before it Ever Took Off in Vietnam

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Vietnamese conglomerate Vingroup JSC is abandoning plans to launch Vinpearl Air so it can focus on other businesses, including electric vehicle manufacturing.

“The aviation market of Vietnam has a lot of potential and is developing strongly, but it also has large companies already in operation,” Vingroup Vice Chairman Nguyen Viet Quang said in an email statement. “Vingroup’s strong investment in aviation could lead to an oversupply.”

The company last year announced plans to enter Vietnam’s crowded skies and in August the civil aviation authority said Vinpearl Air qualified. The plan was to begin services this summer. Vingroup, whose businesses range from real estate to a new automaker named VinFast, will now instead invest in technology and manufacturing, according to the statement.

The decision to stop investing in aviation is consistent with the company’s strategies announced in 2018 to restructure its businesses to focus on a few core areas, including technology and manufacturing, the statement said.

“We also need to focus our resources on developing our technology and industry segments,” Quang said in the statement. “So we decided to withdraw from the aviation industry.”

Company Chairman Pham Nhat Vuong said in December that he’s plowing as much as $2 billion of his own fortune to export VinFast EVs to the U.S. and other markets by 2021. VinFast, whose factory opened last year, also has a line of electric scooters.

Vingroup will divest stakes in some units to fund VinFast, while other subsidiaries have been ordered to reduce costs. VinFast will also seek more loans in addition to the $1.95 billion in international financing it has already raised.

In 2018, Vingroup started its VinSmart unit to make smartphones.

Vinpearl Air would have competed with state-run Vietnam Airlines JSC, which owns 70% of low-cost operator Jetstar Pacific Airlines Aviation JSC, as well as budget carriers VietJet Aviation JSC and Bamboo Airways, which began service last year. Vietnam Airlines also owns Vietnam Air Services Co., known as Vasco.

Vietnam’s domestic airlines served 55.3 million passengers in 2019, up 11.3% from the previous year, according to the General Statistics Office.

©2020 Bloomberg L.P.

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