TOKYO/KUALA LUMPUR ANA Holdings Inc (9202.T) will buy AirAsia Bhd (AIRA.KL) out of a Japanese budget airline joint venture for 2.45 billion yen ($25.11 million), the Malaysian low-cost carrier said, dissolving a loss-making alliance after less than two years.
The venture, based at Tokyo's main international airport in Narita, has failed to win over Japanese travelers since it was set up in August 2011. ANA, which owns 67 percent of the venture, has blamed the poor performance of AirAsia Japan on ineffective marketing and a user-unfriendly booking website.
Differences in opinion on issues ranging from cost management to where the business should be based contributed to the breakup, AirAsia said in a statement on Tuesday.
The split comes at a time when AirAsia is planning to expand overseas. The pullout from the venture, however, is consistent with AirAsia's past decisions to drop loss-making routes.
"I remain positive on the Japanese market and believe there is tremendous opportunity for a low-cost carrier to succeed," AirAsia Group CEO Tony Fernandes said in the statement.
"We have not given up on the dream of changing air travel in Japan and look forward to returning to the market," he added.
AirAsia Japan has been reporting losses since it began operations with flights to five local destinations and two in South Korea.
The venture cut ANA's operating profit by about 3.5 billion yen in the year ended March, ANA's Senior Vice President Shinzo Shimizu said on Tuesday.
"We judged it would be better to operate the carrier as a wholly owned unit," Shimizu said at a press conference in Tokyo.
ANA has another budget joint venture Peach based out of Osaka's Kansai airport.
Local rival Japan Airlines (9201.T) operates Jetstar Japan, a joint venture with Qantas Airways (QAN.AX) that has bases in both Narita and Kansai.
Shimizu said ANA will decide in July how to operate the former AirAsia venture and will choose a name for the unit.
A possible merger with Peach was one option being considered, he added.
The unit will use the AirAsia livery until November.
The termination of the venture involves the return of all AirAsia aircraft leased to AirAsia Japan by November 1, the Malaysian budget airline said.
AirAsia Japan currently operates four Airbus A320s with a fifth due to join the fleet shortly.
It will return some in September with the remainder to be returned at the end of October, an ANA spokesman told Reuters.
The loss of some aircraft from September may result in cancellations. ANA will offer flights using its own aircraft where feasible, the spokesman said.
ANA will decide in July what aircraft it will use from November.
Its options are to lease other A320s or Boeing 737s, buy second-hand jets, or re-configure its own aging A320s as a bridging solution, the spokesman said. ($1 = 97.5750 Japanese yen)
(Reporting by Tim Kelly in TOKYO and Niluksi Koswanage in KUALA LUMPUR; Editing by Ryan Woo)