AirAsia-ANA tie-up ends amid row over running low-cost carrier

AirAsia Bhd, Asia's biggest budget airline, said it will dissolve a low-cost carrier venture with ANA Holdings Inc amid disputes over operating the company.

Senior managers appointed by ANA "just didn't understand the low-cost business," AirAsia Group Chief Executive Officer Tony Fernandes said in a telephone interview today. ANA will buy AirAsia's stake in the airline, the Tokyo-based carrier said today in a statement, without giving a reason for dissolving the venture.

AirAsia will get a full refund for its investment, including debt, and this may have a "positive" effect on its earnings, Fernandes said. ANA will keep operating low-cost carrier services from Tokyo's Narita airport until the end of October under the AirAsia brand, according to the Japanese airline's statement.

The partners could not agree on domestic routes to fly out of Narita, Fernandes said, without providing further specifics. Differences between the two companies stemmed from ANA's background as a full-service carrier versus AirAsia's experience with budget services, Fernandes said.

AirAsia will return to the Japanese market with the right kind of partner and has been approached by three or four people for such a tie-up, Fernandes said.

"We just couldn't agree on the right people to manage the business and the right way to manage the business," Fernandes said. "The load factor was very good, if you look going forward. It's just that we had the wrong cost structure."