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 said Monday.
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.
Stricter border controls have been introduced since the virus outbreak to prevent infections from spreading. Foreign travelers to Japan dropped more than 99 percent from a year earlier for the fifth straight month in August.
Global air traffic is not expected to return to levels before the coronavirus pandemic until 2024, according to a recent projection by the International Air Transportation Association.
The withdrawal from Japan will be the second time for AirAsia after it dissolved a joint venture with All Nippon Airways Co. in 2013.
AirAsia plans to retain its business license to operate flights, but it remains to be seen if it will re-enter the Japanese market, Aida said.
The budget airline launched fight services in Japan again in 2017 with new partners such as e-commerce company Rakuten Inc. but grounded all routes in April due to the coronavirus spread. It resumed domestic flights in August, but the number of passengers remained low, and all routes were once again suspended in October.
Affected customers will be contacted via email with further information on how to refund their tickets.