AirAsia stumbles in Japan

Asia’s biggest low-cost carrier (LCC), AirAsia, is close to pulling out if its Japanese joint venture – AirAsia Japan – following disagreements with partner All Nippon Airlines (ANA).

AirAsia Japan began flying in August 2012 and has been unprofitable since then; while that is not unusual for a new carrier, AirAsia chief Tony Fernandes has cited a deep divide between how he and ANA want to manage the Tokyo Narita-based airline.

This could well lead AirAsia to sell its stake in AirAsia Japan to ANA, which would then manage it alone. “AirAsia Japan will do well… But it's got to be run as a low-cost airline. The difficulties right now… are that we just have different styles of running it," Fernandes told the Wall Street Journal.

If Fernandes does sell – and some news sources are already reporting it a done deal – it would leave ANA with two Japanese LCCs: AirAsia Japan and Osaka, Kansai-based Peach, which it runs as a joint venture with Hong Kong private equity investors.

Both carriers operate A320s so the logical next step for ANA would be to combine AirAsia Japan and Peach under the latter’s brand, if it could overcome any objections from Peach’s other owners.

These would probably focus on AirAsia Japan’s high cost base at Narita, which Peach’s more low-cost friendly operation might have to subsidise.

Any hasty exit by AirAsia from Japan is, however, a worrying sign for supporters of no-frills travel in the country, and it could mark the latest in a series of failed attempts stretching back 15 years to introduce the operating model to Japan.

It would also leave ANA without any specialist LCC input, in contrast to Japan Airlines’ Narita-based Jetstar Japan venture, which still counts Jetstar as a 33 per cent shareholder.

That airline is now the litmus test for whether low-cost airlines can thrive in a high-cost country.

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