Business / Corporate

AirAsia looks to bring back budget flights to Japan in '15 via new tie-up

Bloomberg

AirAsia Bhd., Southeast Asia’s biggest budget carrier, is close to restarting plans for a Japanese unit after its partnership with ANA Holdings Inc. unraveled in June, Chief Executive Officer Tony Fernandes said.

“Japan is a market we are very bullish on,” Fernandes said in an interview in London on Friday. The Sepang, Malaysia-based airline has lined up local partners and plans to commence service next year, the executive said.

The carrier, with units in Indonesia, Thailand and the Philippines, expects to begin service with a new Indian venture in March as it aims to expand its regional reach. ANA, which took over AirAsia Japan Co. after almost a year of operating because of a disagreement over strategy, has rebranded the unit Vanilla Air, leaving Fernandes to reformulate plans.

“We have had one year of free advice really,” Fernandes said. “It’s a fantastic market.”

The Japan unit will avoid Narita airport to achieve lower costs, he said. The venture with ANA, Japan’s biggest airline, ran out of Narita, where Fernandes said it should never have been based.

Operations from Japan will not begin until next year in part to allow AirAsia to focus on establishing its India unit this year, Fernandes said. Indian government approval to have a low-cost airline in a once closed market of 1.2 billion people is “imminent” with flights slated from March.

The airline will initially use 10 Airbus A320 single-aisle jets. AirAsia will focus on secondary markets in India to minimize airport fees and other costs.

India has loosened investment rules, spurring AirAsia and Singapore Airlines Ltd. to form ventures in the world’s second-most populous country and Etihad Airways PJSC of Abu Dhabi to take a stake in Jet Airways (India) Ltd. The number of passengers in the nation is forecast to triple to 452 million by 2020.

Acting as a trailblazer will give AirAsia first-mover advantage, though it could also ease the way for rivals as it works with the government to establish the steps needed for an overseas carrier to win operating approval, he said.