The official announcement of AirAsia Japan dissolution marks AirAsia’s limit to reproduce anywhere its low cost model. Another question to come is all about Japanese travellers’s ability to accept LCC…
KUALA LUMPUR – Back to August 2011, the announcement that AirAsia and All Nippon Airways would enter into a joint venture to create a new budget carrier in Japan sounded rather like an odd couple. Never two carriers could have been more opposed in their concept of air transport, from management to pricing or corporate culture.
The honeymoon did not last for too long. On Tuesday, after first denying any split, it was officially announced that AirAsia Japan, with its two bases in Tokyo-Narita and Nagoya would be dissolved. Divorce was consumed between All Nippon Airways and the AirAsia Group in Malaysia.
AirAsia Japan -created in August 2011 and belonging to 51% to ANA and 33 % to AirAsia- never really managed to embark into an aggressive expansion course, which generally characterized any AirAsia venture. In a statement published on Tuesday, AirAsia acknowledged that issues stemmed from a fundamental difference of opinion between its shareholders on how the business should be managed from cost management to where the domestic business operations should be based.
AirAsia Japan has been reporting losses since it began operations to five domestic destinations and two in South Korea. The venture dented ANA’s operating profit by about 3.5 billion yen in the year ended March, ANA’s Senior Vice President Shinzo Shimizu said on Tuesday during a press conference.
The termination comprises an acquisition of AirAsia’s entire shareholding in AirAsia Japan by ANA Holdings Inc. for JPY 2,450,000,000 (approximately RM80,475,150 based on current exchange rates). The termination also involves the return of all AirAsia aircraft leased to AirAsia Japan by November 1st 2013 and the payment of all monies accrued from the leasing of the aircraft. Under the termination, AirAsia Japan will also settle all outstanding invoices due to AirAsia accrued from the commencement of operations.
AirAsia Japan will unwind the use of the AirAsia brand in its operations, including the name of AirAsia Japan itself by November 1st 2013. Operations of AirAsia Japan flights up to October 31st 2013 will continue as planned.
In the usual Asian “game” of avoiding a loss of face, both airlines tried to justify the end of AirAsia Japan. AirAsia Group CEO Tony Fernandes said, “I have great respect for ANA as the leading legacy airline in Japan but it is time for us to part ways and focus our attention on what we do best, which is running a true LCC. Despite the cost issues, the AirAsia brand has resonated with Japanese customers and the trend we see for July and August is very strong for all of Japan. I remain positive on the Japanese market and believe there is tremendous opportunity for a LCC to succeed, as proven by the success AirAsia X has seen”.
According to Reuters in Japan, ANA management blamed the poor performance of AirAsia Japan on ineffective marketing and a user-unfriendly booking website. The carrier’s load factors gravitated so far around 60%, a rather unsatisfying number compared to AirAsia’s other affiliates, which experience average load factors of 80% and more…
To be blamed are also high operating costs in Japan, the positioning of the carrier at Narita Airport, a 65-km distant gateway and the restrictions on domestic traffic rights. Despite Tony Fernandes assessment that low cost carriers can do well in Japan, Japanese remain generally faithful to a notion of full-service when travelling…
AirAsia Japan will then disappear at the end of October with a possibility for the operation to be absorbed into All Nippon Airways other low cost operation, PEACH, based in Osaka. ANA Vice President Shinzo Shimizu said ANA will decide in July how to operate the former AirAsia venture and will choose a name for the unit.
AirAsia still did not give up its idea of being present in Japan: “we have not given up on the dream of changing air travel in Japan and look forward to returning to the market,” he added. It has been said that AirAsia is now in talks with 4 to 5 Japanese investors.
Luc Citrinot a French national is a freelance journalist and consultant in tourism and air transport with over 20 years experience. Based in Paris and Bangkok, he works for various travel and air transport trade publications in Europe and Asia.
