Is the new AirAsia Japan delaying launch?

It was July 1st when the reincarnation of AirAsia Japan (Mk II) was boldly announced (AirAsia Japan is officially reborn; first flight June 2015.) with non-airline partners Octave Japan Infrastructure Fund owning 19%, Rakuten 18%, Noevir Holdings 9%, and Alpen 5% with an initial capital totaling 7 billion JPY, together with AirAsia's [AK/AXM] 49%. First flight was told to take place as early as July 2015 from Nagoya/Chubu Centrair [NGO/RJGG] (AirAsia Japan selects Nagoya Chubu Centrair.) initially with domestic routes. But nothing has been heard from them since.

However, in their Third Quarter 2014 report, the AirAsia Group announced plans to take only five Airbus A320s in 2015, with four earmarked for Thai AirAsia [FD/AIQ] and a single aircraft for AirAsia (Malaysia). The southeast Asia market is now suffering from overcapacity and most of AirAsia Group's airlines are incurring losses or significantly reduced profits, though still performing better than most competitors. In the previous version of its 2015 fleet plan, which was released in August as Second Quarter 2014 earnings were reported, the LCC group had additionally earmarked three A320s each for AirAsia India [I5/IAD] and Japan. Does this  mean AirAsia Japan (Mk II) will not take delivery of any aircraft, and thus not launch operations next year? Or are some of the Malaysian unit's surplus A320s coming over?

Airbus A320-216 HS-ABO of Thai AirAsia taxies at Bangkok's Don Mueang. All of AirAsia's affiliates are incurring losses or significantly reduced profits. With aircraft for AirAsia Japan no longer in the orderbooks for 2015, has the launch been delayed? (Photo: Ryosuke Yano)

And on November 22nd, Skymark Airlines' [BC/SKY] President and CEO Shinichi Nishikubo disclosed that AirAsia Group was indeed one of a handful of carriers they were negotiating with for a partnership. Japan's third largest carrier looked for new tie-ups as their profitability rapidly deteriorated (Skymark posts 5.7 billion JPY loss for 1Q FY2014.) amid a depreciated JPY, heavy competition with LCCs as well as full-service carriers, and costs related to the introduction of the A330 (Skymark Airlines inaugurates Airbus A330 service.) and now-canceled A380 (Skymark's Airbus A380 order in jeopardy.). But Mr. Nishikubo has narrowed down its potential partner to Japan Airlines [JL/JAL] (Skymark in talks with JAL for broad tie-up.), and told that talks with AirAsia Group started in August and only ended earlier this month.

Actually, it is now known that Hiroshi Mikitani, President of AirAsia Japan's (Mk II) key partner Rakuten, was on the verge of acquiring a majority stake in Skymark earlier this spring. However, the deal fell through when Mr. Mikitani found out about Skymark's troubles regarding the A380 order, a few months before that news came to light. So, AirAsia Japan (Mk II) probably had some inside knowledge about Skymark's financial state and outlook. "We will start from a non-Tokyo city, but Tokyo is a very big market that cannot be omitted," told Yoshinori Odagiri, CEO of AirAsia Japan (Mk I & II), who has seemed confident in obtaining slots at heavily-regulated Tokyo/Haneda [HND/RJTT]. Or had they drawn a picture of taking over Skymark from the first place (Is AirAsia considering a Skymark takeover?)? 

With the government's target to bring 20 million visitors to Japan by 2020 when the Tokyo Olympics/Paralympics take place, opening up airspace over metropolitan Tokyo, which could potentially create 50 or so more slot-pairs at Haneda, is seriously being discussed. But the Japan Civil Aviation Bureau (JCAB) along with the government so far seem unwilling to distribute the slots to LCCs, calling it "prized properties that belong to the Japanese public." AirAsia is counting on Mr. Mikitani, who is a member of the government's Economic Revitalization Committee and has personal relationships with Prime Minister Shinzo Abe, to receive slots at the preferred Tokyo airport near downtown.

Nagoya is a huge metropolitan area that could potentially become a home for an LCC. However, the market is underdeveloped and with people too used to the super-efficient Shinkansen and hometown carrier All Nippon Airways [NH/ANA], it will take a few years for locals to accept AirAsia Japan (Mk II). Further, the battle has actually already begun, with Jetstar Japan [GK/JJP] having entered the market and expanding (Jetstar Japan starts three routes from Kumamoto.), and ANA retaliating by slashing fares to match them on competing routes. AirAsia Japan (Mk II) probably knows more than anyone else that domestic low-fare is difficult to make it work without a hub in Tokyo, so if prospects of getting Haneda slots diminish, there may not be an incentive to relaunch the Japanese unit after all. Let's wait and see...

Reference: Business Journal, September 10th. (in Japanese)
Reference: Sankei Shimbun, November 23rd. (in Japanese)
Reference: Centre for Aviation, November 24th. (in English)

AirAsia Japan is officially reborn; first flight June 2015.

On July 1st, AirAsia Group CEO Tony Fernandes formally announced the launch of AirAsia Japan (Mk II) at a press conference in Tokyo. The newest unit of the Malaysia-based pan-Asian LCC group was officially formed on this day, with Mr. Fernandes saying "This is Part 2 of AirAsia Japan's performance, and it will be the last. We will bring Japan and the rest of Asia closer by offering affordable fares." First revenue flight is to take place in summer 2015.

Yoshinori Odagiri, AirAsia Japan (Mk II) CEO; Tony Fernandes, AirAsia Group CEO; and Hiroshi Mikitani, President of Rakuten (black shirt). (Photo: Aviation Wire)

An initial capital of 7 billion JPY has been raised from five investors; Malaysia's AirAsia (AK/AXM) accounts for 49%, Octave Japan Infrastructure Fund 19%, Rakuten 18%, Noevir Holdings 9%, and Alpen 5%. According to voting-rights, AirAsia will control 33%, the maximum possible figure allowed under Japan's current airline foreign ownership laws, while Octave will have 28.2%, Rakuten 18%, Noevir 13.4%, and Alpen 7.4%. "We are very excited to return to Japan's skies together with Octave, Rakuten, Noevir and Alpen this time round. I am more confident than ever that AirAsia Japan, led by Odi (Odagiri Yoshinori) with the strong partnership we have with our new investors, will continue to realize our vision to revolutionize the low-cost carrier segment of Japan," Mr. Fernandes said.

Octave was incorporated in Japan in May 2014 and its major business is to manage the shares of AirAsia Japan. Rakuten (AirAsia and Rakuten to announce AirAsia Japan on July 1st.) was an IT venture originally founded in February 1997 but now Japan's largest e-commerce firm, with other major businesses including financial services, telecommunications, and professional sports, owning the Tohoku Rakuten Golden Eagles baseball team. Noevir is involved in the cosmetics, pharmaceuticals, and health food and apparel industry. Alpen has been producing a wide range of sports equipment from ski, golf, tennis, marine sports, and baseball since 1972, and it also manages ski resorts, golf courses, and fitness clubs.

From top-left to right: Taizo Mizuno (President of Alpen), Hiroshi Mikitani (President of Rakuten), Yoshinori Odagiri (CEO of AirAsia Japan), Tony Fernandes (CEO of AirAsia Group), and Takashi Okura (President of Noevir Holdings). (Photo: Mynavi)

"If you look around the world, LCCs are stimulating air travel. Their share has grown to around 50% in Southeast Asia, but still only accounts for 3% in Japan. The country is now moving to increase foreign visitors to 20 million by 2020 (when the Tokyo Olympics/Paralympics take place). LCCs will play a pivotal role in surpassing that milestone and will also contribute to the country's economy," Mr. Mikitani said, adding "We are simply a shareholder supporting AirAsia's growth in Asia." Being a personal friend of Mr. Fernandes as well, he also said, "From in-flight entertainment to shopping and payments, the airline market has lots of possible synergies with IT. E-commerce partnerships are possible in the long-term."
 
CEO of AirAsia Japan (Mk II) is Yoshinori Odagiri (New AirAsia Japan names CEO; official launch in April.), who also headed the first incarnation. The failed 10-month joint-venture (JV) between AirAsia and All Nippon Airways (NH/ANA) has since relaunched as Vanilla Air (JW/VNL) (Vanilla Air launches operations.) under full ANA control. Starting out his aviation career with ANA back in 1987, Mr. Odagiri quit ANA and AirAsia Japan (Mk I) in August 2013, two months after the JV was dissolved (operations under the AirAsia brand continued through October 26th), and joined AirAsia the following month to help re-launch the red brand in the country of the rising sun. 

"AirAsia Japan has returned," Mr. Odagiri enthused, telling that operations will start as early as June 2015 on domestic routes, followed by regional international flights. An initial fleet of two 180-seat Airbus A320s will be sourced from AirAsia Group's huge order pool, with four planned by the end of 2015. Five will be added each year after that.

Some of AirAsia Japan's aircraft will feature special liveries designed by photographer and film director Mika Ninagawa. (Image: Mika Ninagawa)

Asked about their hub, Mr. Odagiri answered "Nagoya was chosen (New AirAsia Japan to be based at Nagoya Chubu Centrair.) for initial registration purposes. We will formally announce a hub in due course," adding "We will start from a non-Tokyo city, but Tokyo is a very big market that cannot be omitted. The (Japanese) government is considering increasing slots at Haneda, and we certainly would like to receive some." He went on to say "We first need to stabilize our business by producing profits on trunk (domestic) routes, and after that, we hope to enter the under-served rural (domestic) markets."

Regarding pilot shortages which have plagued LCCs Peach Aviation (MM/APJ) (Peach outlines Summer 2014 mass cancellations.) and Vanilla Air (Vanilla Air cancels 154 flights in June due to pilot shortage.) with mass cancellations, Mr. Odagiri said "We want to plan well, including crew sourcing from the group's other airlines."

Speaking about the Tokyo/Narita (NRT/RJAA)-based LCCs struggling to turn profits, Mr. Fernandes commented "Because they're based at high-cost Narita. And Haneda is not far away. If we take a different approach, we believe we can produce a profit in five or six years." He also said "What we learned the first time is that we should work with like-minded people. We make decisions very quickly. We'll do better than partnering with huge established corporations." For the failed first attempt, AirAsia erred in giving majority control to ANA, which made the move mostly to prevent AirAsia from partnering with other companies. As Mr. Mikitani's statement implies, AirAsia is at the controls this time, and the other investors are only supporters.

AirAsia's distinctive red flight attendants. Noevir will reportedly supply their cosmetics. (Photo: Mynavi)

"We are ready to take on this challenge and with great teamwork, we hope to bring AirAsia's successful low-cost business model once again to Japan. Our counterparts in Malaysia, Thailand, Indonesia, the Philippines, and India have seen great and encouraging responses in their markets, and we will work towards the same for Japan. We would like to thank the investors for their belief in us and we look forward to working closely with them moving forward," said Mr. Odagiri.

Now AirAsia Japan (Mk II) would be the fifth LCC in an already increasingly crowded market. Is market consolidation (any eliminations?) coming up in the not-too-distant future? Vanilla Air, though wholly-owned by ANA, seems to be the weakest. Further, just of note, Vanilla Air has dozens of staff who were inspired by AirAsia and Mr. Fernandes and said they "would like to work with a future AirAsia," when the first JV was dissolved. Now that their former direct boss (Mr. Odagiri) has moved to restart the red brand, will a brain-drain happen at Vanilla Air?

Reference: Traicy, July 1st. (in Japanese)
Reference: Reuters Japan, July 1st. (in Japanese)
Reference: MyNavi, July 1st. (in Japanese)
Reference: Aviation Wire, July 1st. (in Japanese)

AirAsia and Rakuten to announce AirAsia Japan on July 1st.

Japan's largest e-commerce firm Rakuten will reportedly be AirAsia Group's primary Japanese partner to launch the new AirAsia Japan (Mk II). The new LCC plans to launch domestic and regional international routes from Nagoya/Chubu Centrair (NGO/RJGG) in summer 2015 using Airbus A320s. AirAsia Group CEO Tony Fernandes and Rakuten President Hiroshi Mikitani are expected to hold a joint press conference on July 1st.

AirAsia Group CEO Tony Fernandes speaking at the New Economy Summit 2014 held in Tokyo in April. (Photo: AFP)

The Malaysian LCC's first attempt at the Japanese market with AirAsia Japan (JW/WAJ) (Mk I) (CoachFlyer JW8541: NRT - FUK on AirAsia Japan's Airbus A320.) ended in a divorce with joint-venture (JV) partner All Nippon Airways (NH/ANA) only 10 months after launching operations in August 2012, due to disagreements over how the airline would be run and other complicated reasons. Operations ceased on October 26th, 2013, and the airline restarted as Vanilla Air (JW/VNL) on December 20th under 100% ANA ownership (Vanilla Air launches operations.). 

Asked about the deal, a Rakuten spokesperson commented "There is nothing to disclose at this moment." Rakuten operates Rakuten Travel, a popular internet-based travel website, and AirAsia would be able utilize Rakuten's extensive domestic distribution channels, while Rakuten would be able to tap into the booming intra-Asian travel market through AirAsia. This partnership could become crucial, since Japan's general public prefers booking through travel agencies and participate in package tours, instead of purchasing tickets directly from airlines and making travel itineraries on their own.

AirAsia (AK/AXM) intends to hold 33%, the maximum possible figure under Japan's airline foreign ownership rules, while the remainder will be split among two to three companies including Rakuten. However, three would enable AirAsia to retain the highest share. Earlier this February, Mr. Fernandes had revealed that talks were underway involving 'like-minded' listed Japanese companies to invest up to 70 million USD in initial start-up capital. For their failed first try (Mk I), they had erred in giving ANA majority control at 67%.

AirAsia is currently using a legal vehicle named Air Innovation, which in March set up AAJR, the body that would become the new airline. AAJR was officially renamed AirAsia Japan on May 1st and registered their headquarters at Chubu Centrair (New AirAsia Japan to be based at Nagoya Chubu Centrair.). AirAsia's new Japanese unit will be led by CEO Yoshinori Odagiri, former CEO of AirAsia Japan (Mk I) (JW/WAJ) and CFO Osamu Hata, Dell's former Japan unit head (New AirAsia Japan names CEO; official launch in April.).

Reference: Toyo Keizai, June 26th. (in Japanese)
Reference: Nikkei Shimbun, June 26th. (in Japanese)
Reference: Asahi Shimbun, June 26th. (in Japanese)

AirAsia plans return to Japan in 2015.

Speaking at the New Economy Summit 2014 in Tokyo on April 10th, AirAsia Group CEO Tony Fernandes revealed that a new joint-venture (JV) in Japan would be set up and be operational in 2015. "Everyone wants to come to Japan. We're going to make affordable and Japanese love to travel so I'm very bullish," Mr. Fernandes said.

AirAsia CEO Mr. Tony Fernandes speaking at the New Economy Summit 2014. (Photo: Aviation Wire)

Mr. Fernandes told the media that he had found "fantastic partners" who are "more like-minded," and "bright in technology, can talk to the government on equal terms, and revolutionize the Japanese market," though he refrained from disclosing any names. Asked by media whether Hiroshi Mikitani, CEO of Rakuten, is involved, Mr. Fernandes replied "he's a friend, and it might be better for us to remain only friends." Originally an IT venture, Rakuten is now Japan's largest e-commerce firm and a multinational internet business, and has been rumored to be AirAsia's partner.

As to where the new JV would be based, AirAsia has been searching for an airport that meets the following criteria; (1) open 24 hours and not slot-restricted, (2) minimum travel disruptions due to weather, (3) low-cost, and (4) not a hub for other LCCs. This essentially leaves Nagoya's Chubu Centrair (NGO/RJGG) as the top candidate, however, with 2020 Tokyo Olympics/Paralympics on the horizon, they are also eager to open a base in the Greater Tokyo area, and AirAsia officials visited Ibaraki (IBR/RJAH), a one-and-a-half-hour bus ride from Tokyo Station, also on April 10th. In other regions, Kobe (UKB/RJBE) and Sendai (SDJ/RJSS) are also being considered for focus cities.

Mr. Fernandes added "Haneda and Narita are too slot-restricted and too costly," and went on to say "Japan wants to increase visitors from overseas (to 20 million by 2020), but they're not building a LCC airport. Instead of trying to do something with Narita, why not build a new LCC-dedicated airport?"

Former AirAsia Japan (Mk I) CEO Mr. Yoshinori Odagiri will also head the new AirAsia Japan (Mk II). (Photo: Aviation Wire)

On February 13th, Mr. Fernandes mentioned on Twitter that they had named former AirAsia Japan (Mk I) (JW/WAJ) head Yoshinori Odagiri its CEO for the new AirAsia Japan (Mk II), along with naming Osamu Hata, who previously worked with Dell's Japan unit, its CFO (New AirAsia Japan names CEO; official launch in April.).

Their first AirAsia Japan (Mk I), a JV with All Nippon Airways (NH/ANA), was terminated last year only 10 months after starting operations in August 2012, due to complicated reasons including differences in how the airline would be run. It ceased flights in October 2013 (CoachFlyer JW8541: NRT - FUK on AirAsia Japan's Airbus A320.) and relaunched as Vanilla Air (JW/VNL) two months later (Vanilla Air launches operations.) under 100% ANA control. "For ice cream, you need chocolate and raspberry, not only vanilla," Mr. Fernandes referred to the former JV in a sarcastic manner. Talking about its first Japanese incarnation, "It was a nightmare, and probably for ANA too," he recalls, adding "We've always worked as one captain of the ship. When you have two airlines, there are two views on how to do things."

The group's long-haul arm AirAsia X (D7/XAX) launched flights to Chubu Centrair on March 17th, making it their third Japanese destination after Tokyo/Haneda (HND/RJTT) and Osaka/Kansai (KIX/RJBB). Although delays with its India venture in obtaining an air operator's permit (AOP) seem to be having some effect, nevertheless, AirAsia is expected to make a formal announcement for the reincarnation of a Japanese unit later this month or May. "We shall return like Caesar," Mr. Fernandes is bullish, adding "this could be – and I still believe it, it's a strong statement – probably the most profitable company within AirAsia".

Source: Asahi Shimbun, April 10th. (in Japanese)
Source: Traicy, April 10th. (in Japanese)
Source: Mainichi Shimbun, April 10th. (in Japanese) 
Source: Aviation Wire, April 10th. (in Japanese)

*Post edited/updated on April 11th.