• By The Financial District

AIR ASIA TO PULL OUT OF JAPAN AS DEMAND SINKS

Malaysian budget airline AirAsia Group will pull out of the Japanese market, as the coronavirus pandemic is likely to keep a lid on demand for air travel, its Japanese unit told Kyodo news agency.

AirAsia Japan Co. will discontinue domestic routes between Chubu Centrair International Airport in Aichi Prefecture and three locations -- Sapporo, Sendai and Fukuoka -- and one international route connecting with Taipei on Dec. 5, becoming the first airline operating in Japan to close its business due to the virus outbreak.


When the struggling local unit launched an early retirement program in June to reduce labor costs, 70 out of 300 employees applied for the plan. Most other employees will be dismissed in November.


"Despite our unrelenting efforts to sustain operations through successive and wide-ranging cost reduction initiatives, we have concluded that it would be an extremely challenging feat for us to continue operating without any visibility and certainty of a post-pandemic recovery path," Jun Aida, AirAsia Japan's chief operating officer, said in a release. The impact of a drop in passengers becomes more serious for a low-cost carrier as its business model is based on a higher load factor and more frequent flights to raise operation efficiency per aircraft.