Japan's e-commerce giant Rakuten to enter low-cost carrier business with AirAsia

Japanese e-commerce and Internet giant Rakuten Inc. is planning to invest in Malaysian-owned budged airline carrier AirAsia Bhd, with the two companies eyeing the launch of a joint venture next year, pending government approval, local media reported Thursday.

According to the reports, Rakuten, known predominately for its online retail services, will buy a major stake in AirAsia, owned by Malaysian business tycoon Tony Fernandes, and boost its already burgeoning online travel services and offer other services such as online seat reservation, in a move replicating H.I.S.'s strategic establishment of Skymark Airlines, Japan's largest budget carrier.

The prospective joint venture follows Ferandes' initial bid to expand in Japan, following a tie-up between AirAsia and ANA Holdings Inc. in 2011, that folded in 2013 amid conflicting business views and a lack of patronage.

According to the Nikkei business newspaper, Fernandes and Rakuten owner Hiroshi Mikitani, Japan's fourth-richest person, are set to announce the deal on July 1 in Tokyo, but both parties declined to officially comment Thursday.

Under Japanese law, a local airline joint venture cannot be more than 33.3 percent owned by a foreign firm and analysts here said that a tie-up with Rakuten makes perfect sense, as part of the reason AirAsia's joint deal with ANA flopped was because of inadequate marketing and poor Internet support -- areas Rakuten excels in.

Reports have said that AirAsia will be based at Japan's Chubu Centrair International Airport near Nagoya, which would provide the carrier with landing rights unavailable to other carriers at both Narita and Haneda airports.

Rakuten have made five major acquisitions this year, including the 905 million U.S. dollar purchase of mobile messaging and call application Viber, adding to its total of 100 investments made by the e-commerce firm since 2000.

The firm, headquartered in Tokyo's Shinagawa business district, was founded in 1997 and is currently the largest e-commerce site in Japan and among the world's largest by sales.