AirAsia-ANA tie-up - AirAsia Japan

[flee 5]

Always maintained personally that HND should have been the starting point. D7 can feed into JW and vice versa.

 

And yes, conflict of interest - when ANA can pump more resource into 'their' main LCC Peach.

 

Hope Tony can recover and find another partner.

Yes, there is definitely a conflict of interest. If they re-enter Japan, the partner should be an investor like Tata in India and not an existing aviation industry player. Unfortunately, HND ops are at the pleasure of the Japanese govt. and not for the airlines to choose!

 

I think that for now, they will focus on getting Airasia India up and running. The four ex-JW aircraft can easily be deployed to India while a fifth (originally intended for JW) is being outfitted right now in XFW. This can be sent there too.

 

I think that a relaunch might be more feasible with a NGO hub, if HND is not possible. D7 is also planning to fly into NGO.

[flee 5]

AirAsia Ends ANA Tieup Over Operating Disputes at Carrier

By Chong Pooi Koon - Jun 25, 2013 5:44 PM GMT+0800

AirAsia Bhd. (AIRA), the region’s biggest budget airline, said it will dissolve a low-cost carrier venture with ANA (9202) Holdings Inc. amid disputes over operating the company.

Senior managers appointed by ANA “just didn’t understand the low-cost business,” Tony Fernandes, AirAsia’s group chief executive officer, said in a telephone interview today. ANA will buy out AirAsia’s stake in the airline, the Tokyo-based carrier said today in a statement, without giving a reason.

AirAsia Japan has struggled to fill as many seats as low-cost carriers Peach Aviation Ltd., partly owned by ANA, and Jetstar Japan Co., which also began budget flights in Japan last year. While the Malaysian discount carrier has successfully expanded its low-cost model to countries including Thailand and Indonesia, its strategic partnership with Malaysian Airline System Bhd. was terminated last year after union protests.

AirAsia Japan’s partners couldn’t agree on domestic routes to fly out of Narita, said Fernandes, without providing specifics. Differences between the two companies stemmed from ANA’s background as a full-service carrier versus AirAsia’s experience with budget services, he said. He also said allowing ANA to appoint the chief executive officer and chief financial officer was a mistake.

“We just couldn’t agree on the right people to manage the business and the right way to manage the business,” he said, speaking from Jakarta. “The load factor was very good, if you look going forward. It’s just that we had the wrong cost structure.”

Full Refund

The Malaysian carrier will get a full refund for its investment, including debt, and this may have a “positive” effect on earnings, Fernandes said. ANA will keep operating low-cost carrier services from Tokyo’s Narita airport until the end of October under the AirAsia brand, according to the Japanese airline’s statement.

AirAsia, based in Sepang, Selangor, fell 1 percent to close at 3.03 ringgit in Kuala Lumpur trading. The shares have risen 18 percent this year, outperforming a 2.4 percent gain in the benchmark FTSE Bursa Malaysia KLCI Index. ANA fell 2 percent to 197 yen in Tokyo and is up 8.8 percent this year.

Adding Services

AirAsia Japan, which began operations in August, has five domestic services. It also flies to Seoul and Busan in South Korea. The carrier planned to add flights to Taiwan next month and was considering another overseas flight before the end of March as it more than doubles its fleet to nine planes from four, Yoshinori Odagiri, chief executive officer of the carrier, said earlier this month.

AirAsia will return to the Japanese market and has been approached by three or four potential partners, said Fernandes. Its next partner may not even be an airline, he said.

“It’s shown that legacy airlines cannot run low-cost carriers,” said Fernandes. “A like-minded airline maybe, but not a full-service airline.”

Source: http://www.bloomberg.com/news/2013-06-25/airasia-ends-ana-tieup-amid-disputes-on-running-low-cost-carrier.html

 

[flee 5]

AirAsia Japan collapses after AirAsia Group was too bearish while ANA lacked experience

 

Diagnosing the exact cause of failure at AirAsia Japan, which will end operations with that name on 31-Oct-2013, is subject to opinion of joint venture partners AirAsia Berhad and All Nippon Airways (ANA), as well as third parties. But most would agree that there have been fundamental structural problems.

Many of the challenges have faced not only AirAsia Japan but also Jetstar Japan and Peach Aviation. Some problems were spotted in advance and intentionally avoided by peers. Collectively, they point towards LCCs having a long-term future in Japan but only under the right circumstances.

AirAsia Japan’s troubles stem from its ownership structure that gives ANA majority control; something that a Japanese carrier does not have in Jetstar Japan or Peach. This allows LCC professionals, not legacy managers, to run the airline.

All of the other AirAsia affiliates have local partners from outside the full-service airline sector. AirAsia is not able to own a majority of any of its affiliates outside Malaysia but it has cooperative partners, allowing the group to make sure the AirAsia LCC DNA is embedded with every new carrier launched. ANA was AirAsia's first full-service carrier partner and will almost certainly be its last.

AirAsia was also too bearish in the globalisation of its product, ignoring local distribution systems as well as Japanese nuances that it is now turning towards – supporting the theory of "glocalisation". This is somewhat surprising as AirAsia previously learned a similar lesson in Indonesia, where its affiliate in the initial years struggled as the group ignored local nuances including the need for a local distribution solution.

Full analysis: http://centreforaviation.com/analysis/airasia-japan-collapses-after-airasia-group-was-too-bearish-while-ana-lacked-experience-114196

[V Wong 0]

Good analysis of the problem. Paritcularly like this :

 

"ANA acknowledges it has learning to do about the LCC model, but found arrogance in AirAsia's unwillingness to deviate from what worked in other countries. In Malaysia and subsequently Thailand, AirAsia could establish norms and have the population bend to it. But in Japan AirAsia tried to change years of well-embedded – and convenient – practices."

[Mohd Azizul Ramli 2]

Our spy at the AK Gossip Division was fortunate to be able to embargo an email from Uncle Tony recently, which contains a parting words email to all his Allstars about this Japanese JV. Uncle Tony mentioned the word SACRED a lot in it. Some other key points in the email:

 

• It became evident that we were not going to be able to replicate the same culture across the entire organization (in AirAsia Japan) and on that, I could not compromise. The brand and the one AirAsia culture is very sacred to me. And nothing and no one will stop my pursuit of keeping that. (which might refer to ARROGANCE as being mentioned in an earlier reply).
• AK will be selling all of its shares to ANA, they will return all AirAsia aircraft and AirAsia Japan will unwind the use of the AirAsia brand in its operations by November 1st 2013. Operations of AirAsia Japan flights up to October 31st 2013 will continue as planned.
• Despite the differences with ANA in running the business, the AirAsia brand resonated well with Japanese consumers.
• AK has not given up on the dream of changing air travel in Japan and will be returning to the market with the right partners.

[V Wong 0]

Most Japanese are tactful and mild mannered, so that 'no = maybe yes'.. If you can't read their mind or understand the nuances in communication, and talks straight, then I'm afraid it is perceived as being arrogant and disrespectful, especially when there are at least four levels of politeness in its language. Maybe...ok... yes.. no...?

Edited June 30, 2013 by V Wong

[flee 5]

Yes, I believe that may also be why the Proton and Mitsubishi partnership also did not work out, although the GLC took longer to unravel it.

[alberttky 0]

AirAsia Japan cancels hundreds of flights in September, October

 

TOKYO - AirAsia Japan has said the budget carrier will cancel hundreds of flights over two months before it ceases operations under the current brand at the end of October.

AirAsia Japan, operated jointly by Malaysia-based AirAsia and major Japanese carrier All Nippon Airways (ANA), will suspend 14 daily flights from September 1 to October 26, according to a company statement.

The carrier said the cancellations, which will reportedly affect 14,000 passengers, was because of a lack of planes to service all its routes.

The affected routes include flights linking Seoul to the central Japanese city of Nagoya and Tokyo to the northern city of Sapporo.

The carrier will cease operations by the end of October, just over a year after it started flying out of Tokyo's Narita airport in August.

Announcing the dissolution of AirAsia Japan in June, the Malaysian carrier cited a "fundamental difference of opinion between its shareholders on how the business should be managed, from cost management to where the domestic business operations should be based".

ANA however said the venture dissolved because it was not well known in Japan and could not register profits.

The Japanese carrier plans to launch a new budget brand in November.

 

- See more at: http://www.relax.com.sg/article/news/airasia-japan-cancels-hundreds-of-flights-in-september-october#sthash.IG4M9L6L.dpuf

[S V Choong 4]

Ouch... could this be the first ever failure of the Air Asia brand?

Edited July 27, 2013 by S V Choong

[Mohd Azizul Ramli 2]

No. Vietnam is the first failure.

[flee 5]

Yes, incorrect choice of partners and excessive government interference are the causes the their failures. Now, we have to watch AirAsia India too. That might fail as well - government and other political interference seems to be slowing down their launch date...

[Dr Chuo Hock Tieng 0]

Oh oo... Something went wrong some where ...

http://www.thestar.com.my/News/Nation/2013/07/27/AirAsia-Japan-cancels-flights.aspx

[Suzanne Goh 0]

I dunno what went wrong or whose fault it was - but to cancel flights on the run up to the termination of venture is not nice.

 

If you do this, you might as well close now. It's like tendering your resignation with 30 days notice, and then taking a whole bunch of MC's and when you ARE at work, not putting a whole lot of effort into it.

 

They are STILL a Joint venture for now, and should behave as such.

[Waiping 12]

If you do this, you might as well close now. It's like tendering your resignation with 30 days notice, and then taking a whole bunch of MC's and when you ARE at work, not putting a whole lot of effort into it.

 

Happens on individual basis but can't imagine a Japanese company would do that. Closing down and laying off staff might have been easier to accept. The problem is ANA is still alive and kicking and I do hope they would offer alternative travel plans to affected passengers.

[flee 5]

I think that ANA is already putting Peach at NRT. They have announced the NRT-KIX route already and may announce more routes later.

 

The return of leased aircraft will definitely affect flights and, hopefully, affected pax have sufficient time to get onto alternative flights.

[Cheng Long 0]

Yes, incorrect choice of partners and excessive government interference are the causes the their failures. Now, we have to watch AirAsia India too. That might fail as well - government and other political interference seems to be slowing down their launch date...

 

Air Asia is where it is today partly thanks to gov interference, but interference in their favour of course...

 

BTW did Japanese gov interfere with Air Asia Japan?

[flee 5]

Air Asia is where it is today partly thanks to gov interference, but interference in their favour of course...

 

BTW did Japanese gov interfere with Air Asia Japan?

Any good govt. should ensure that the economic environment in their country is conducive to the efficient conduct of business activities. That will ensure that the economy will grow and the country is prosperous.

 

As for as AirAsia being where it is today, the govt. may be relieved that it is no longer a burden to it and the country as it was when it was under the stewardship of DRB-HICOM. Nowadays, it is a major contributor as a taxpayer as well as employer. It also raised the country's profile by many winning industry and business awards.

 

With AirAsia Japan, it was the choice of partners that had more effect on its performance than the effect of govt. interference. I remember that in the early days of AirAsia X, they had to overcome a lack of understanding from airport authorities concerning the needs of LCCs.

 

If they are ever to return to Japan again, they must ensure that they and their future partners must work out the whole JV agreement meticulously to ensure that past mistakes are not repeated and future mistakes minimised or avoided altogether.

[Isaac 0]

I would suggest that Air Asia stops pursuing to set up a local company in Japan and also South Korea once and for all. Brand loyalty in these two countries is so high and people there prefer their own kind and Air Asia unfortunately, is not quite Japanese. Besides, it definitely wasn't ANA's fault that booking for Air Asia Japan was so low even during peak season.

[Kris Kim 0]

No. Vietnam is the first failure.

The Vietnam plan never really took off, the Vietnamese government didn't allow Viet Jet to have the AirAsia part in their name hence why AirAsia backed out and the carrier launched to what it is today. That was the 2nd attempt in Vietnam though. Jetstar Pacific had the same problems but launched before the Vietnamese government had them silly rules regarding branding, but with VN's 70% share holding, BL's future looks much better.

 

It also looks as though Jetstar compliments AirAsia's Asian bases.

 

AirAsia: Malaysia, Thailand, Indonesia, Philippines, Japan, India

Jetstar: Australia, New Zealand, Vietnam, Singapore, Japan, Hong Kong

Edited July 28, 2013 by soorox

[flee 5]

I would suggest that Air Asia stops pursuing to set up a local company in Japan and also South Korea once and for all. Brand loyalty in these two countries is so high and people there prefer their own kind and Air Asia unfortunately, is not quite Japanese. Besides, it definitely wasn't ANA's fault that booking for Air Asia Japan was so low even during peak season.

I am not sure why that is - the Japanese travelling public seem to be booking AirAsia X's flights but not AirAsia Japan's. Many aviation experts believe that operating domestic flights from NRT is more of an issue as the domestic hub for Tokyo is HND. Perhaps, they should have followed Peach (another new brand) and had their first hub outside of Tokyo.

[Isaac 0]

I am not sure why that is - the Japanese travelling public seem to be booking AirAsia X's flights but not AirAsia Japan's. Many aviation experts believe that operating domestic flights from NRT is more of an issue as the domestic hub for Tokyo is HND. Perhaps, they should have followed Peach (another new brand) and had their first hub outside of Tokyo.

However, Jetstar Japan's main base is also NRT. And while Air Asia is blaming ANA for the failure of JW, First Eastern Investment Group Hong Kong doesn't seem to have any problem with ANA for their Peach Aviation JV.

[Mohd Azizul Ramli 2]

It also looks as though Jetstar compliments AirAsia's Asian bases.

 

AirAsia: Malaysia, Thailand, Indonesia, Philippines, Japan, India

Jetstar: Australia, New Zealand, Vietnam, Singapore, Japan, Hong Kong

 

That might come handy in the future, just in case a mega merger or a takeover is inevitable.

 

The Vietnam JV did took off to a certain extent, mostly internally within the AirAsia Group. I recalled posted a stolen photo of the first batch of Vietnam AirAsia cabin crew in their uniform somewhere in the forum a few years back.

[flee 5]

However, Jetstar Japan's main base is also NRT. And while Air Asia is blaming ANA for the failure of JW, First Eastern Investment Group Hong Kong doesn't seem to have any problem with ANA for their Peach Aviation JV.

I believe that First Eastern is only an investor - so it does not participate in day to day management of Peach and there are no branding constraints as Peach does not have any sister carriers. Peach also operates from a 24 hour hub at KIX - so no curfews and the need to cancel delayed flights.

 

As for Jetstar Japan, it is not doing as well as Peach but they are probably giving it a longer timeline for things to work out. They also suffer from NRTs curfew and cancelled flights are quite common.

[Khalil Abd Halim 0]

maybe they should learn to be real low-cost carrier with price to match, rather than pretending to be one with so much media hype and selling their tickets at similar price with full service carrier. I truly believe this business concept can only work in some countries where the consumers are not well informed of other choices with real value for their money and had been "educated" that Airasia brand is associated with lowcost and offering the lowest price.

 

a low cost carrier should at least price their ticket substantially lower than full service carrier when the seat is the only think that you are giving to the passenger at that price regardless of when the ticket is purchased.

[Mohd. Helmi 0]

It was bound to fail from the get go.

 

1) They never had full management control in AirAsia Japan, unlike peach or even jetstar Japan. ANA shareholding is much higher in Airasia Japan than in Peach, or JAL in jetstar. It was ANA in the management seat, the CEOs of Airasia Japan were all long time ANA employees. Why is it that even as Both Jetstar and Airasia Japan are based at Narita, fly to the same routes bar Korea, started around the same time, yet Airasia Japan underperformed?

 

2) ANA is not all to be blamed, Airasia never tailored themselves to the nuances of the Japanese market, where credit card uptake is low. Japan loves its cash, they didn't have distribution channels to suit the market, ie having c stores as a payment and distribution outlet, a popular method in Japan, instead, relying too heavily on the airasia website, which to the Japanese is too unfriendly. This is a matured market where nuances are entrenched, not emerging South East Asia where the public bends to the company's will.

 

3) I believe ANA took on board Airasia even when they had Peach because they did not want Airasia to go JV with another party, I.e. skymark airlines. Better to canabalize your competitors than face airasia as a competitor. Smart move, costly move for Airasia more so than ANA, the Airasia brand domestically in Japan would be impacted.

 

4) Japan is dead serious about on time performance, train companies would come out with letters to employers for trains being late. ANA is the worlds most punctual airline, this is all at the expense of quick turn around times which Airasia is known for, something that Airasia needs to take more seriously if they are to venture again in Japan.

 

5) This is all a fascinating business case study, but should Airasia try Japan again, it needs to be in management control, it needs to humble itself to the stark differences in the Japanese market, Glocalization is key in Japan.