AirAsia could end Japan venture

AirAsia’s could call time on its Japanese operations, less than a year after founding its Tokyo-based subsidiary.

The Malaysian low-cost carrier group launched AirAsia Japan in partnership with All Nippon Airways (ANA) in August 2012, but 10 months on, poor operating performance and internal conflicts between the two alliance parties have led AirAsia to consider pulling out of venture.

In a statement released today (11 June 2013), AirAsia said the subsidiary was struggling due to “a difference of opinion in management, most critically on the points of how to operate a low-cost business and operating from Narita”.

AirAsia Japan has struggled since its launch, battling high costs and low demand. The airline recorded average load factors of just 70% in the first quarter of 2013 – significantly lower than the airline’s other regional subsidiaries, including AirAsia Philippines which launched just a few months earlier.

Last month, AirAsia Japan’s new CEO, Yoshinori Odagiri, admitted that containing costs has been the carrier’s “toughest challenge”, but said he believed this could be driven down once more scale is introduced to the business. Currently AirAsia Japan operates a fleet of just four aircraft.

But the company now appears to be on the verge of cutting its losses, saying that it is considering several options, including “dissolution of the joint venture”.

“The parties are exploring all available options and any decision will be further subject to respective corporate approvals of ANA and AirAsia Berhad,” the group said in a statement.

Despite the apparent failure of AirAsia Japan, the group said it still has faith in the Japanese aviation market.

“[We have] seen customer adoption increasing as the AirAsia brand starts to resonate in the market. AirAsia continues to be optimistic and committed to Japan and sees the potential for a low-cost airline to thrive in the market and would not rule out any options to make this happen,” it added.