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AirAsia approves shutting down Japan joint venture

AirAsia Japan hit by plunge in travel demand amid coronavirus pandemic

AirAsia Group is reassessing its businesses after performance deteriorated due to a drop in air travel demand caused by the coronavirus pandemic. (Photo by Masayuki Terazawa)

KUALA LUMPUR -- Malaysia-based AirAsia Group, owned by aviation tycoon Tony Fernandes, is shutting down its Japan operations with an announcement slated for early next week, Nikkei Asia has learned, as the region's largest no-frills carrier struggles with grounded aircraft while most international borders remain closed as a result of the coronavirus pandemic.

A source close to the company told Nikkei that AirAsia's directors, who met on Monday at the airline's headquarters near Kuala Lumpur International Airport, have decided to wind up the operations of AirAsia Japan -- a joint venture between AirAsia and Japanese partners.

AirAsia Japan has informed the Aichi local government of its intention to give up the business, Kyodo reported on Wednesday citing an unnamed official. The company has two aircraft based at Nagoya Chubu Centrair International Airport in Aichi.

According to the airline's stock exchange filing last month, AirAsia has an equity interest of 66.91% in AirAsia Japan with voting rights of 33%. The Japanese partners in the company include the country's leading e-commerce player Rakuten, Octave Japan Infrastructure Fund, cosmetics maker Noevir Holdings and sports equipment manufacturer Alpen.

"An announcement is expected next Monday" and the Japanese operation "will be closed down," said the source, who cannot be named as the information is private.

The person said factors contributing to the decision include that AirAsia Japan stopped selling tickets earlier this month, lack of demand and gloomy prospects for travel in Japan.

AirAsia had previously failed in its maiden attempt to establish a low-cost carrier in Japan. Its joint-venture with ANA Holdings' All Nippon Airways fell through just over a year after the original AirAsia Japan was launched in August 2012. ANA purchased AirAsia's stake in the carrier to operate as wholly-owned budget carrier Vanilla Air. The current incarnation of AirAsia Japan was launched in 2017.

In an interview with Nikkei in July, Fernandes revealed that AirAsia needs to raise 2 billion ringgit ($480 million) in the next six months to be in a "very comfortable" position, and was already on the way to securing 1 billion ringgit at that time.

"At 1 billion ringgit, we are comfortable," Fernandes said in his Kuala Lumpur office. "But if we can raise 2 billion ringgit, we would be in a very comfortable position," he added. The airline is aiming for a portion of the funding to come from a rights issuance expected to be completed within four months from now. According to Fernandes, the new shares would be subscribed to by a third-party investor.

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