AirAsia says may dissolve Japan venture over management conflict

by **Cals** Tue 11 Jun 2013, 17:01

AirAsia says may dissolve Japan venture over management conflict
Business & Markets 2013
Written by Reuters
Tuesday, 11 June 2013 16:19

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KUALA LUMPUR (June 11): Malaysian budget airline AIRASIA BHD [] said on Tuesday that it may dissolve its Japan-based joint venture with All Nippon Airways Co (ANA) due to disagreement between the companies over how to operate the business.

AirAsia, Asia's biggest budget airline, said in a stock exchange filing that it would not rule out the "dissolution" of AirAsia Japan, a low-cost carrier based at Tokyo's Narita airport.

"Since its launch, AirAsia Japan has failed to track its proposed business plan due to the inability to manage costs," AirAsia said.

AirAsia Japan has been reporting losses since it began operating in August 2012 with flights to five local destinations and two in South Korea. AirAsia, in reporting its first-quarter results on May 22, said AirAsia Japan posed a bigger challenge compared with its other ventures due to cost issues.

AirAsia Japan operated four aircraft with a load factor of 70 percent as of March, while AirAsia's other ventures recorded 75 to 87 percent for the same period, the company said.

AirAsia, which has a 33 percent stake in AirAsia Japan, noted that the management of the venture is "predominantly comprised" of ANA staff including the chief executive and chief financial officers.

ANA said nothing has been decided in regard to ending the joint venture.

AirAsia gets 80 percent of its earnings from Malaysia, but it has invested heavily towards expanding its operating markets, with a total fleet of 124 planes, to stay ahead of emerging rivals including Lion Air's Malindo Airways.

The company's long-haul arm AirAsia X launched a $370 million initial public offering on Monday, with a third of the funds earmarked for capital expenditure. AirAsia X chief executive Azran Osman Rani identified Japan and China as a priority for the airline to build brand awareness, after it shed loss-making routes to Europe and India in January last year.

AirAsia's Indonesian unit may launch a $200 million IPO by the end of the year, Chief Executive Tony Fernandes told Reuters last week.