Why Japanese Retailers Decided to Jump Into the Budget Airline Battle

Airlines across the world are trying to turn into retailers to boost profits. In Japan, retailers are instead jumping into the airline business.

A year after it ended its pursuit of the Japanese budget market, AirAsia is planning to begin a second attempt in the nation next year with the help of a trio of Japanese retailers. Rakuten, Japan’s largest online retailer, announced Tuesday that it will acquire an 18 percent stake in the new airline, which is expected to begin flying in the summer of 2015.

Rakuten is controlled by Japanese billionaire Hiroshi Mikitani, who spent $900 million in February to acquire the messaging service Viber and has a $100 million stake in Pinterest, a website where people pin photos and other digital flotsam. Mikitani and his wife control more than 23 percent of Rakuten’s shares. The company also runs an online travel business in Japan and the U.S. retail site, Buy.com, which it has rebranded.

Cosmetics and pharmaceutical firm Noevir and Alpen Group, a Japanese sporting goods maker, are also investing in the new carrier. AirAsia plans to raise about 7 billion yen ($69 million) for the new venture. A representative at Noevir’s U.S. headquarters in Irvine, Calif., said the company declined to discuss the airline, and Alpen Group could not be reached for comment.

The new airline would mark AirAsia Chief Executive Tony Fernades’s second attempt to break into Japan, the one market that has thus far eluded his successful track record as an airline entrepreneur. AirAsia’s joint venture with All Nippon Airways, called AirAsia Japan, dissolved last year when the Japanese airline bought out Fernades’s 33 percent stake and renamed the carrier Vanilla Air. ”We have not given up on the dream of changing air travel in Japan,” Fernandes told The New York Times last year.

The ANA-AirAsia joint venture never worked given different philosophies on how to approach the discount segment of the Japanese market. ANA executives argued that Japanese consumers demanded a higher, meticulous level of service that AirAsia could not provide—a service that meant higher costs. AirAsia, in turn, bristled at ANA’s fiscal approach about running a financially tight operation, the kind necessary for a successful low-cost airline.

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Budget carrier AirAsia plans flights in India soon

Asia’s leading budget carrier, AirAsia, is hoping to begin operations in India in two to three months, the airline’s CEO said today.

The carrier this month won court approval to operate in India after delays because of domestic airlines’ opposition. AirAsia India will begin flying with two planes, Tony Fernandes, AirAsia group chief executive officer, told reporters.

Despite a market of 1.2 billion people, airlines in India are unprofitable due to high costs and cut-throat competition. But Fernandes says AirAsia has studied the market for a long time and “we feel moderately optimistic.”

He spoke in Manila where he attended the World Economic Forum on East Asia.

He said with a new government in place, a wave of optimism and a strengthening rupee and stock market, “it’s a good time to be in India.” Prime Minister-elect Narendra Modi is to be inaugurated on Monday.

“There’s a billion people there, how strange if we can’t make it work,” Fernandes said. But despite the optimism, he said the carrier will start with only two planes and “we’re just going to dip our toes, we won’t sink our whole body there.”

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AirAsia to pilot INTERPOL’s I-Checkit system to improve passenger security

AirAsia will be the first airline in the world to trial INTERPOL’s I-Checkit system, which checks passengers’ passports against the global Stolen and Lost Travel Documents (SLTD) database, in an effort to increase air travel security.

The I-Checkit system will be integrated with AirAsia’s own check-in systems during the passenger check-in process across the entire international network, allowing the airline to check passport numbers against INTERPOL’s SLTD database, which contains more than 40 million records from 167 countries.

No personal data will be transmitted to INTERPOL, as only the travel document number, form of document and country code will be screened in a process that takes less than 0.5 seconds. Should a passenger’s passport register a positive match against the database, AirAsia will refer the passenger to local authorities, and INTERPOL’s procedures will simultaneously be engaged to notify all relevant INTERPOL National Central Bureaus worldwide.

Tony Fernandes, AirAsia Group CEO, said: “AirAsia is extremely pleased to be the first airline globally to collaborate with INTERPOL to implement I-Checkit.” He went on to say that the partnership will provide passengers with “added assurance” when travelling by air.

INTERPOL Secretary General Ronald K. Noble, commented: “This will raise the bar across the industry for passenger safety and security by preventing individuals using stolen or lost passports from boarding international flights. AirAsia has established the new standard for airline security by screening the passports of all international passengers against INTERPOL’s database. After today, airlines will no longer have to depend solely on countries screening passports to keep passengers safe from terrorists and other criminals who use stolen passports to board flights. Like AirAsia, they will be able to do it themselves as well.”

At present, less than 10 countries systematically screen passengers’ passports against the SLTD database, and in March this year, the problem surrounding the issue of passengers travelling on stolen passports was placed in the spotlight, when it was revealed that two passengers on Malaysia Airlines flight MH370 were in possession of lost or stolen passports.

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