AirAsia Prepares Japan Discount Airline After Split With ANA

January 22, 2014 Leave a comment

AirAsia Prepares Japan Discount Airline After Split With ANA

AirAsia Bhd. (AIRA), Southeast Asia’s biggest budget carrier, is close to restarting plans for a Japanese unit after a partnership with ANA Holdings Inc. (9202) 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 Jan 17. 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 enterprise will avoid Tokyo’s Narita airport to achieve lower costs, he said. The venture with ANA, Japan’s biggest airline, operated from Narita, where Fernandes said the carrier should never have been.

Operations from Japan will not begin until next year in part to allow AirAsia to focus on establishing its India unit in 2014, 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 for as soon as March.

Minimize Fees

The airline will initially use 10 Airbus Group (AIR) A320 single-aisle jets. AirAsia will focus on secondary markets in India in order 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, Fernandes said.

A cost focus applies to the entire airline as Fernandes targets a reduction of at least 7 percent across the group in 2014 on top of a 5 percent cut last year. Ancillary sales should grow 25 percent, with the 20 planes added to the fleet.

Setting up a South Korean arm is not on the near-term agenda, Fernandes said, adding the market is still closed. “I am not sure the South Koreans are ready for a foreign airline.”

To contact the reporters on this story: Robert Wall in London at rwall6@bloomberg.net; Christopher Jasper in London at cjasper@bloomberg.net

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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