The Prime Minister has given the okay to national flag carrier Vietnam Airlines' takeover of budget carrier Jetstar Pacific.

Jetstar, which is owned by State Capital Investment Corporation (SCIC), has been in serious financial difficulties for years.

The SCIC has a 70 percent State-owned stake in the airline. The remaining shares are held by Australian flag carrier Qantas and Saigontourist.

The takeover plan was first proposed by the Ministry of Finance.

Vietnam Airlines would manage SCIC's total stake in Jestar and appoint its representative at the carrier's board of directors, SCIC general director Lai Van Dao told online newspaper Vneconomy.

"The stake transfer is expected to take place by February 15," Dao said.

Vietnam Airlines has an 80 percent stake in the local aviation market, while Jetstar Pacific has about 17 percent.

The takeover has raised questions about the monopoly status of Vietnam Airlines domestically.

To counter the State airline's dominance locally, Jetstar Pacific would remain an independent carrier, Lai Xuan Thanh, the Civil Aviation Administration of Viet Nam's deputy director, told online newspaper DTinews.

Meanwhile, the Ministry of Transport has proposed raising the minimum legal capital holding of firms involved in aviation transport to reduce the risk of another airline going under, as was the case with Indochina Airlines.

Currently, carriers with between two to 10 aircraft must have a legal charter capital of at least 700 billion Vietnamese dong (US$33.5 million) before launching international air routes - as opposed to the 500 billion Vietnamese dong  figure previously set. To operate locally, airlines must now have reserves of at least 300 billion Vietnamese dong (US$14.4 million), as opposed to 200 billion Vietnamese dong  as before.

The Civil Aviation Administration of Viet Nam said aviation costs had risen sharply over the last few years as fuel prices have soared.