VietJetAir was fined 20m dong ($956; £611) for the Hawaiian-themed dance on its first flight from Ho Chi Minh City to Nha Trang, Tuoi Tre newspaper says.
Passengers filmed the five women on their mobile phones on 3 August.
Officials say VietJetAir had "violated local aviation regulations".
The decision to fine the airline was reached after officials met on Wednesday, the newspaper reports.
A statement on the company's website says that it wanted to capture a "holiday atmosphere" for its new flight route to Nha Trang, one of the country's most popular holiday destinations.
"Once passengers stepped on board they were met by flight attendants dressed in beach holiday attire [who] performed a sexy Hawaii dance," it said.
Nguyen Trong Thang, chief inspector of the country's civil aviation body, was quoted as saying that the airline "had violated the local aviation regulations by organising unapproved show on a plane".
But he stressed that the mobile phones used to film the dance were in safe mode.
Videos of the women dancing for three minutes that were posted online stirred public debate in the conservative country, reports say.-British Broadcasting Corporation (August 09, 2012)
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