AirAsia Bhd said on Tuesday it would set up a low-cost airline with Japan's biggest online retailer Rakuten Inc and other firms, marking the budget carrier's second attempt to tap one of Asia's lucrative air travel markets.
The new carrier, AirAsia Japan, will have an initial capitalization of 7 billion yen ($69 million) and will start flying in about a year with a fleet of five Airbus A320 aircraft, the carrier's CEO Yoshinori Odagiri told reporters.
The airline will fly to both domestic and international destinations, but has yet to decide which airport will be its base, according to him.
For Malaysian-based AirAsia, the venture with businesses not involved in the airline industry is another attempt to expand to Japan after it pulled out of a partnership with the country's biggest carrier ANA Holdings Inc in 2013.
That venture, launched in 2011, failed to woo travelers and ANA blamed poor marketing and a user-unfriendly website. The airline has since been rebranded into Vanilla Air, and is now wholly owned by ANA and based out of Tokyo's Narita airport.
Rakuten, controlled by Japan's fourth-richest man Hiroshi Mikitani, aims to boost its online travel site through the partnership and create new business to fend off increased competition from the likes of Amazon.com Inc. Rakuten's travel site is already one of the largest in Japan. Two decades ago, travel company H.I.S pioneered the trend, setting up Skymark Airlines, which is now Japan's leading discount carrier.
Mikitani said he saw great potential in the budget travel market in Japan.
"In America, discount carriers account for 30 percent of travel. In Southeast Asia, it's 50 percent. In Japan, it's only 3 percent," he told the same news conference.
Rakuten will own an 18 percent stake in the new airline, while Noevir Holdings Co, a diversified conglomerate that owns an aircraft leasing business, will own 9 percent. Octave Japan Infrastructure Fund will own 19 percent and sports firm Alpen Co will own 5 percent.
AirAsia's return would intensify competition among Japan's discount carriers, which have struggled to wrest travelers away in a domestic market dominated by ANA and Japan Airlines.
Of the nine low-cost carriers flying within Japan, six including Peach Aviation, Jetstar Japan and Air Do are controlled or affiliated with the nation's two big main carriers.
