AirAsia Japan has closed operations

Report by : Gan Yung Chyan, KUCINTA SETIA

Since the covid epidemic started in Japan, the Japanese aviation industry has suffered an unprecedented shock. According to Japanese media reports, AirAsia Japan has recently decided to terminate its aviation business due to operational difficulties. This is also the first airline to withdraw from the Japanese market since the outbreak.

According to reports, AirAsia Japan has now decided to withdraw from the aviation market, and this news will be officially announced to the outside world on 5 October 2020. 

AirAsia Japan is a low-cost airline established in 2014 by AirAsia Berhad and several Japanese companies. Headquartered in Aichi Prefecture in central Japan, it operates 3 domestic routes from Nagoya Chubu and 1 international route to Taoyuan. Since the outbreak, the company grounded its flights in April this year, and did not resume Japan's domestic routes until August, but soon announced that it would be grounded again starting October.

The sharp decline in the number of passengers is the root cause of AirAsia Japan’s operating difficulties. Data show that the number of passengers carried by ADB in Japan in the second quarter was less than 2500, a decrease of 98% compared to the same period last year. Even after the operation resumed in August, it did not improve. This allowed low-cost airlines to achieve profitable business by increasing attendance and turnover. The model is difficult to maintain. AirAsia Japan’s registered capital is only 2 billion Yen,  making it difficult to cope with the shortage of funds in the long term.

Before deciding to withdraw from the market, AirAsia Japan also tried self-help measures. In June 2020, a voluntary resignation program for all employees was launched, but only 20% of about 300 employees were willing to respond. On the other hand, AirAsia Japan’s largest shareholder, AirAsia Berhad, is also seeking assistance from investors and financial institutions in order to cope with its own shortage of funds. Some analysts pointed out that the conditions for financial assistance are likely to include the withdrawal of AirAsia Japan, which has sluggish performance.