Business

Thursday February 9, 2012

AirAsia-Jetstar competition intensifies in Japan(update)

By B.K. SIDHU
bksidhu@thestar.com.my


PETALING JAYA: Just as AirAsia Bhd gets its approval to begin operations in the Philippines and Japan, its rival Jetstar is bringing forward its launch date for the Japan market.

The Australian low-cost carrier announced yesterday that it had brought forward the launch of its Japanese subsidiary by several months ahead of AirAsia's unit.

According to The Sydney Morning Herald, Jetstar Japan had originally intended to begin flights on domestic routes late this year but had now slated July 3 as the launch date. It also confirmed that the joint venture between the Qantas Group, Japan Airlines and Mitsubishi would begin with a network linking Tokyo, Osaka, Sapporo, Fukuoka and Okinawa.

Fernandes: ‘And also no matter what obstacle we find a way. Great great news. Five AirAsia airlines now.’

Jetstar Japan would have a fleet of just three new A320 aircraft each seating 180 passengers before increasing it to 24.

AirAsia will also likely bring forward its launch date from August to a date earlier than Jetstar Japan.

AirAsia obtained its air operator's certificate (AOC), an essential approval before it can begin flights last week for its Japan unit. Yesterday, it announced that its Philippines venture had also received the AOC.

With both the AOCs in place the airline's base of operations has expanded to five countries - Malaysia, Thailand, Indonesia, and soon in Japan and the Philippines.

In all the operations other than Malaysia, AirAsia has 40% to 49% equity stake each.

The Philippines unit is a 60-40 joint venture between Filipino investors Antonio O. Cojuangco, Michael L. Romero and Marianne B. Hontiveros, and AirAsia International Ltd, a wholly-owned subsidiary of AirAsia.

As for Japan, AirAsia has a 49% and Japan's largest carrier, All Nippon Airways has 51% equity stake in AirAsia Japan.

“The platform for future growth has been planted and we believe this will enable AirAsia to sustain its strong growth trajectory.

“As for the financial contribution, it will take two to three years for any contribution from its new units as there is a need for the operations to reach a critical mass and scalability in order to be operationally profitable,” said an analyst with a local brokerage.

AirAsia group CEO Tan Sri Tony Fernandes in his tweet said that “AirAsia Philippines has its AOC. Nothing stopping maan (Marianne), our CEO. And also no matter what obstacle we find a way. Great great news. Five AirAsia airlines now.”

He added that: “Finalising AirAsia Japan's budget and AirAsia Philippines two very exciting joint ventures. We will open up travel to those countries. The people of Japan and Philippines won't know what hit them.”

AirAsia Japan will fly out of Narita while AirAsia Philippines will operate from Diosdado Macapagal International Airport (DMIA) in Clark, Angeles, Pampanga.

The Philippines venture will begin its domestic and international operations utilising two brand new Airbus A-320s sometime next month, starting with domestic operations.

Meanwhile, Singapore Airlines' long haul low-cost carrier Scoot has decided that Gold Coast would be its second destination after Singapore. Scoot's first destination is the Singapore-Sydney-Singapore route. AirAsia's sister airline, AirAsia X will be flying the KL-Sydney-KL route on April 1 ahead of Scoot and it has been plying the KL-Gold Coast-KL for several years now.

Meanwhile Bernama reported Thursday that OSK Research Sdn Bhd has reaffirmed its bullish view that AirAsia Japan will be profitable from the first year of operation from the high-yield market.

In a research note today, OSK said Japan's low-cost passenger segment was under-served, with its penetration rate at only 9.1 per cent.

"AirAsia Japan's planned destinations are among the top four domestic destinations in Japan, while on the international side, Seoul is in the top spot with Busan (also in South Korea) ranked somewhere between 10 and 15," it said.

OSK said AirAsia would be competing head-on (in terms of routes operating from Narita airport) with Jetstar Japan, which was expected to commence operation a month earlier.

It said Jetstar's presence would certainly add heat to the competition but the fact that penetration of low-cost travel in Japan was relatively low compared to other regions meant that the market was big enough for all.

AirAsia Japan last week received the air operator certificate (AOC) to start operations by Aug 1, 2012 from Narita airport to Sapporo, Fukuoka and Okinawa and to Seoul and Busan in October.

Meanwhile, OSK said it was optimistically cautious on AirAsia Inc, AirAsia's Philippines associate.

It said the Philippines, an attractive market for low-cost carriers given the archipelagic nature of its geography, was conducive for air travel.

OSK said coupled with the high number of Filipinos working abroad as a boost to international travel, the Philippines offered significant growth potential given the propensity for air travel on the back of rising per capita income.

AirAsia Inc has received its AOC from the Civil Aviation Authority of the Philippines.

It is expected to commence flights as early as March or April 2012 to Singapore, Hong Kong and Macau. OSK has maintained earnings and 'buy' call on AirAsia with the fair value unchanged at RM4.57.

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