Malaysia’s low-cost carrier AirAsia Group Bhd said on Monday its associate AirAsia Japan (AAJ) is ceasing operations, as it seeks to reduce cash burn amid “highly challenging operating conditions”.
AirAsia said it had been notified of the decision taken by the board of directors of AAJ to cease operations with immediate effect, a regulatory filing on Monday showed.
“We respect and have agreed to the decision made by AAJ as this would reduce the cash burn of AAJ and the company amid the highly challenging operating conditions in Japan which have been aggravated by the COVID-19 pandemic that has plagued the world since early this year,” it said.
AirAsia Group posted a net loss of 992.89 million ringgit ($238.97 million) in the second quarter ended June 30, compared to a net profit of 17.34 million ringgit ($4.17 million) a year ago. Revenue plunged 95.9% to 118.96 million ringgit ($28.63 million) from 2.92 billion ringgit ($702.82 million) in the period.
Net loss for the first six months ended June 30 stood at 1.8 billion ringgit ($433.25 million), compared to a net profit of 111.78 million ringgit ($26.9 million) in the same period a year earlier. Revenue for the six months declined 57% to 2.43 billion ringgit ($584.87 million) from 5.65 billion ringgit ($1.36 billion).
Nikkei Asia had reported on Sept 30 that the AirAsia Group, owned by aviation tycoon Tony Fernandes, will announce the shutting down of its Japan operations early this week. The report had cited a source close to the company.
AirAsia Japan is 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.
According to the airline’s regulatory filing last month, AirAsia has an equity interest of 66.91% in AirAsia Japan with voting rights of 33%. Other Japanese partners in the company include e-commerce player Rakuten, Octave Japan Infrastructure Fund, cosmetics maker Noevir Holdings, and sports equipment manufacturer Alpen.
AirAsia had previously failed in its maiden attempt to set up 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, according to Nikkei Asia.