AirAsia Makes Use of Malaysia Airline's Decline

19th Aug 2014

​While Malaysia Airlines is reeling from the twin air tragedies this year, AirAsia is busy strategizing how it could maximize its chances of filling the void that the former is creating.

The region's largest budget carrier has ordered more aircraft with plans to penetrate further into India and Japan, two of the world's largest travel markets.

AirAsia Bhd. has just announced that it has teamed up with Rakuten, a giant Japan-based e-commerce company to set up a local subsidiary of his low-cost empire in Japan. The joint venture will be AirAsia's second attempt to establish a local subsidiary in Japan after its first venture with All Nippon Airways failed in 2013.

The new joint venture has AirAsia holding 49% of the equation, while Rakuten holds 18%. The rest of the stakes are held by three other Japanese investors which include Noevir Holdings (9%), a cosmetics, energy drinks, and aircraft leasing firm; Alpen (5%) a sortswear firm; and Octave Japan (19%), a private equity firm.

Recent rumors had it that Skymark, the third largest and financially-struggling airline in Japan, and AirAsia Bhd. are in talks for a possible takeover of the former by the latter. A Skymark spokeperson, however, denied any such talks ever occurred between the two airlines. The rumor even persisted that the Malaysian-based low-cost carrier and financial institutions actually had ongoing discussions to provide financial support to the ailing carrier.

In the most recent Farnborough Air Show in Hamshire, England last July, the low-cost behemoth announced that it has ordered 50 A330-900neos worth $13.75 billion from Airbus Company. This makes AirAsia Bhd. the biggest launch customer for the new generation wide-body airliner which is still under development at the aircraft manufacturer's factory. It will be the world's most cost efficient jetliner when it finally hits the sky.

According to a bank analyst, however, in the shadow of Malaysia Airline's restructuring programs, AirAsia will stand to lose its advantage if Malaysia Airlines will get resurrected as it will mainly focus on shorter domestic and regional routes. He further said that the state-owned airline may reemerge as a stronger and more competitive airline.