Monday, June 10, 2013

AirAsia and All Nippon Airways Clash Over Japan Budget Airline: WSJ

Updated June 10, 2013, 8:39 a.m. ET


The Wall Street Journal

KUALA LUMPUR, Malaysia—Management tension is threatening to derail a budget-airline venture between AirAsia Bhd. and the parent company of All Nippon Airways, indicating the challenges of operating a carrier in Japan.

The AirAsia Japan venture between AirAsia and ANA Holdings Inc. has been unprofitable since it started flying in August, underscoring the difficulty of getting a low-cost airline off the ground in Japan, where landing and ground-handling fees are among the highest in the world. AirAsia Japan, based at Tokyo's Narita airport, competes with ANA cut-price airline Peach Aviation Co.

"We are looking for the best ways for the future growth of AirAsia Japan, and that includes the possible dissolution" of the venture, an ANA spokesman said.

ANA and AirAsia chief Tony Fernandes said there were no immediate plans to end the partnership, however, responding to a Nikkei newspaper report that they were set to dissolve the venture.

"The problem is not with the model, it's with management," Mr. Fernandes told The Wall Street Journal. AirAsia Japan will do well, he said. "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." He didn't elaborate on the points of disagreement.

AirAsia holds 33% of AirAsia Japan, and ANA owns the rest. AirAsia said last month that the partners were discussing a turnaround plan. AirAsia Japan Chief Executive Yoshinori Odagiri said keeping costs low had proved to be the company's biggest challenge.

AirAsia Japan flies to only five Japanese destinations plus Seoul and Busan, South Korea, using a fleet of four Airbus A320 jets. It meanwhile has to resolve the challenge of operating at Narita, which is one of the busiest airports in Japan but isn't open 24 hours a day, unlike Kansai International Airport, where Peach is based.

Malaysia's AirAsia remains the biggest budget carrier in Asia, operating a fleet of 124 Airbus A320s. It also has operations in Thailand, Indonesia and the Philippines and is seeking regulatory approval for a venture in India.

AirAsia's long-distance affiliate, AirAsia X, held an initial public offering on Monday, seeking to raise up to $426 million. The IPO would be Asia's largest since the listing of Japan Airlines Co. last year, according to Dealogic.


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