The Wall Street Journal
By MEGUMI FUJIKAWA
Oct. 29, 2015 5:14 a.m. ET
TOKYO— AirAsia Japan Co. is set to fly again next spring, and it is looking to make a profit within two years by leveraging its group’s network in China and striking deals with its new investing partners.
AirAsia Japan this month received approval from Japan’s transport ministry to operate flights in Japan. It plans to link its base, Central Japan International Airport near Nagoya, with the northern Japanese cities of Sapporo and Sendai, as well as Taipei.
The low-cost carrier is making its second approach at the Japanese market, which is dominated by full-service carriers All Nippon Airways Co. and Japan Airlines Co. An earlier AirAsia joint venture with ANA fell apart in 2013 due partly to differences in management styles.
Japanese budget carriers have struggled. Skymark Airlines Inc., the country’s third-largest airline, filed for bankruptcy protection in January, while Vanilla Air—as ANA’s parent ANA Holdings Inc.rebranded the AirAsia joint venture after it took control—only recently swung to profit, notching its first in the quarter ended Sept. 30.
AirAsia Japan Chief Executive Yoshinori Odagiri, who also served as CEO of the previous AirAsia Japan venture, said he is eager to expand by adding routes that can feed passengers to other AirAsia group carriers, which number 10 in six countries, focused especially on Southeast Asia.
“We are in a somewhat different position from other AirAsia members because, in Japan, full-service carriers have strong presence and there are solid ground transportation such as trains, highways and buses,” he said. “By offering low-cost flights, we want to change the existing framework.”
Mr. Odagiri said international service is expected to make up slightly over half of its operations in the future, with China a strong candidate, followed by South Korea, Hong Kong, Taiwan, Macau, Guam and Saipan, among others. Among these, AirAsia Japan’s first venture flew only to South Korea and Taiwan.
“China is a place I always have in mind,” Mr. Odagiri said in an interview, especially since AirAsia has a strong network there, covering Chinese 14 cities as of July.
Mr. Odagiri also expects the airline can benefit from Chinese tourist traffic to Japan, despite concerns that China’s economic slowdown may reduce the flow.
“The wealthy class may be suffering from the bubble burst, but the middle class, which is our target, keeps coming to Japan,” he said. “Given the country’s large population, it is unlikely that travel demand disappears in the near term.” The number of Chinese visitors to Japan in the first nine months of 2015 was more than double that of a year earlier, according to the Japan National Tourism Organization.
Japan’s low-cost carriers have been hesitant to take on the China market, said Will Horton, a senior analyst at CAPA-Centre for Aviation, but AirAsia’s strong presence at Chinese airports and relationship with travel agents in China would ease AirAsia Japan’s entry and reduce its costs. And given that it already has a number of competitors on Nagoya-bound domestic flights, he added, pursuing international opportunities would make business sense.
Mr. Odagiri said AirAsia Japan and its new investing partners—including Japanese online retail giant Rakuten Inc., sporting-goods chain Alpen Co. and cosmetics-and-pharmaceuticals company Noevir Holdings Co.—are also discussing possible service tie-ups, for example, offering passengers samples of products sold by the retailers.
Mr. Odagiri also cited collaboration possibilities with Alpen’s ski and golf resorts, since one of the carrier’s first destinations is Sapporo, capital of Hokkaido—a popular destination for outdoor activities.
By 2018, the airline expects to become profitable by increasing daily flights to around 90 with about 15 aircraft, he said.
He added that the airline plans to own 20 planes in about five years and wants to have its second hub in one of the metropolitan airports, ideally Tokyo’s Haneda airport, where it can operate around the clock.
Original article can be found here: http://www.wsj.com
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