VASCO was established by government directive in 1987, and was originally a part of Vietnam Airlines, the national carrier. It began scheduled passenger flights independently of Vietnam Airlines in 2004, and approval has been given for it to be partially privatized. It has been reported that Vietnam Airlines wishes to use VASCO as a basis for a low-cost carrier, established in conjunction with foreign partners.
It is believed[when?] that Vietnam Airlines, VASCO's parent company wants to change the airline into a low-cost model, therefore changing VASCO's operational name to Viet Air. It is also believed that the airline would be serving domestic flights within Vietnam to destinations that are low-yielding as well as competing head on with Jetstar Pacific and VietJet Air. Vietnam Airlines would add more aircraft to Viet Air's fleet if the plans are materialized.