Jul 2, 2014

AirAsia teams up with Rakuten in return to Japanese market

3rd from left: Hiroshi Mikitani, chairman and CEO of Rakuten, 4th from left: Yoshinori Odagiri, president of AirAsia Japan, 5th from left: Tony Fernandes, CEO of the AirAsia Group

AirAsia Bhd. has successfully made a comeback to the Japanese market. The company announced on July 1 that it has established AirAsia Japan and plans to kick off flight services by summer next year. Under a so-called entrepreneurial group that is made up of investors such as Rakuten Inc., Noevir Holdings Co. and sports apparel distributor Alpen Co., AirAsia Japan aims to develop flights that will link Japan with Asia and the rest of the world. Its base airport in Japan is slated to be decided shortly, but Yoshinori Odagiri, AirAsia Japan's president, expressed their desire to utilize Haneda, too. Meanwhile, Hiroshi Mikitani, chairman and CEO of Rakuten, claimed that the airline business has strong synergy with information technology (IT), so there are infinite possibilities in the future, including tie-up with e-commerce.

AirAsia Japan will be capitalized at Y7 billion, with AirAsia taking a 49% stake, Octave Japan Infrastructure Fund holding a 19% and Rakuten, Noevir Holdings and Alpen owning 18%, 9% and 5%, respectively. The company will fly Airbus A320 aircrafts, similar to the ones used by the AirAsia Group companies. It will initially lease two aircrafts from the Group and then build a three-plane system soon after. The fleet will be reinforced to have four aircrafts within 2015. Thereafter, the company will add five aircrafts to its fleet each year and expand its service network. All of its aircrafts will be new. It will initially offer domestic flights for the sake of business stability.

Based on the registration of the company's establishment, AirAsia Japan will temporarily be headquartered in Nagoya, but it is currently in the process of selecting the airport that will ultimately be its hub. "There may be problems with their departure/arrival slots, but we still want to get into Haneda in order to capture the inbound demand," said Odagiri, while Tony Fernandes, CEO of the AirAsia Group claimed that, "The regulations of the authorities have dramatically been opening up, so we are looking forward to the changes in Japan." Further, the company expressed its intention to foster its own pilots in parallel with its business expansion.

The AirAsia Group entered into an agreement with All Nippon Airways (ANA) toward the joint operation of LCCs in the country in July 2011. AirAsia Japan was established in August of that year, but the joint venture with ANA was dissolved in June 2013. Odagiri was the president when the joint venture was dissolved. ANA Holdings currently operates its wholly-owned subsidiary Vanilla Air. As for its comeback into Japan, Fernandes had this to say: "The people involved in this venture are different. We realized that it would be better to go about this as group of entrepreneurs who share the same vision, including in terms of the decision-making speed."

Meanwhile, Rakuten's Mikitani claimed that providing inexpensive airfares would be crucial in luring visitors into the country toward the achievement of the government's target of 20 million tourists (10.36 million in 2013) and the promotion of the Visit Japan and Cool Japan programs. He stressed that Rakuten's decision to invest in the joint venture was brought about by the airline industry's strong synergy with entertainment, shopping, payment, e-commerce and other IT services that are offered by Rakuten.

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