The $US50 million ($A53.9 million) Qantas investment in Jetstar Pacific has flown into an ideological chasm in the ranks of the Communist Party and government in Vietnam and it isn’t clear how it can escape.

Two weeks ago the Ministry of Transport ordered Jetstar Pacific to cease using the branding and orange star logo common to all Jetstar operations by next October.

On one side pragmatic party members, believed to include the Prime Minister, Nguyen Tan Dung, have embraced the global branding of trans-border franchises as contributing to the expansion of the Vietnam economy.

On the other, ideologues in the party are waging a glorious struggle against the oppression of the people and their cultural identity from the subversive forces of global capitalism, or words to that effect.

Jetstar Pacific is a domestic low-fare carrier, identical inside and outside to Jetstar in Australia, and the Singapore-based franchise of Jetstar Asia, except for its fleet, which is predominantly aged Boeing 737-400s in urgent need of replacement.

It is currently 27% owned by Qantas and 70% owned by the government’s State Capital Investment Corporation.

The dispute went public after the Minister of Transport, Ho Nghia Dung, issued a statement saying that following receiving a complaint he had “decided that the use of the Jetstar name and logo may make people mistake the Vietnamese carrier for Australian carrier Jetstar”.

This led to Jetstar CEO Bruce Buchanan visiting Hanoi last week and releasing a statement pointing out that the branding of the airline and its integration with the wider Jetstar and Qantas network through their international connections is defined by binding agreements.

The wide-reaching agreement for Jetstar Pacific included the renaming of the airline, operating future flights within Vietnam and importantly providing everyday low fares and a standardised customer experience fundamental to the partnership between the Qantas Group and all Vietnamese interests in the carrier.

In a carefully constructed statement released in Hanoi, Jetstar (Australia) said that Buchanan had NOT answered queries about “the possibility of Qantas’ withdrawal of its capital from this Vietnamese airline”.

The national media was told that Jetstar “is carefully considering the directives by the Ministry of Transport and is seeking clarification in conjunction with the SCIC the majority shareholder”.

Qantas clearly has a problem. The Jetstar brand is its intended vehicle for participating in the boom in low-fare air travel in S-E Asia through a network of interlocking, identically branded franchises, similar to Air Asia, based in Kuala Lumpur, and Tiger Airways, controlled by Singapore Airlines.

Jetstar’s early success in Vietnam has also put it into direct competition with the national flag carrier, Vietnam Airlines, on international and domestic routes.

Vietnam Airlines is reported to be seeking backing from Hanoi for funds to buy a fleet of giant Airbus A380s, while Qantas has dropped hints that it is considering Vietnam as a major offshore base for the expansion of its own long-haul Jetstar International brand to Europe, rather than transit those flights over Singapore or Bangkok.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey