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.
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.”
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