Can this partnership overcome past low-cost carrier challenges in Japan?

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Partnership Aims to Navigate Japan's Budget Airline Market Challenges

Rakuten Inc. and AirAsia Bhd. are forming a new Japanese budget airline venture, with Rakuten planning to take a significant stake. This partnership, set to be announced on July 1 in Tokyo by Rakuten CEO Hiroshi Mikitani and AirAsia group chief executive Tony Fernandes, represents AirAsia's second attempt to establish a presence in the Japanese low-cost carrier market. The venture will operate under Japanese law, which limits foreign ownership in local airline joint ventures to a maximum of 33.3 per cent.
Previous Venture Dissolved Amidst Strategic Disagreements

AirAsia's prior foray into the Japanese market, a joint venture with ANA Holdings Inc., was dissolved in June of the previous year. This dissolution occurred after the venture reportedly failed to gain traction with Japanese travellers. A key factor cited for the breakdown was a disagreement between the partners regarding management strategy, indicating potential difficulties in aligning operational approaches with local market expectations.
Rakuten's Strategic Involvement and Potential Investment Structure

Rakuten, which owns the prominent online travel service Rakuten Travel, brings its established presence in the Japanese digital travel landscape to this new venture. While the exact size of Rakuten's stake is not yet clear, reports suggest that both AirAsia and Rakuten might each invest up to one-third of the capital. The remaining ownership is expected to be distributed among several other Japanese companies, adhering to foreign ownership regulations.
Intensifying Competition in Japan's Budget Airline Sector

The formation of this new airline occurs as Japan's budget airline market is experiencing increased activity. Several carriers commenced operations in 2012, and Spring Airlines Japan has recently begun its flights. This burgeoning competitive environment suggests that the new Rakuten-AirAsia venture will face a dynamic market with established and emerging players vying for passenger share.

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Can this partnership overcome past low-cost carrier challenges in Japan?

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