As budget carrier AirAsia gets set to re-enter Japanese skies through a joint venture, CEO Tony Fernandes is optimistic the new low-cost airline - AirAsia Japan - will be profitable within one year of operation.
"We've very optimistic. We've had a one-year learning experience," Fernandes told CNBC on Tuesday.
After pulling out of a partnership with the country's biggest carrier All Nippon Airways (ANA) last year due to differences over strategy, Malaysian-based AirAsia announced on Tuesday it's teaming up with Japanese e-commerce giant Rakuten, diversified conglomerate Noevir Holdings, Octave Japan Infrastructure Fund will and sports firm Alpen to launch a low-cost airline.
"You've got to have the right partners to share your vision in trying to make change and we've got the best here," he said.
Air Asia Japan, which will fly to both domestic and international destinations, will begin operations in about a year with a fleet of five Airbus A320 aircraft.
Low cost carriers account for just 3 percent of travel in Japan, compared with 30 percent in the U.S. and 50 percent in Southeast Asia, according to Rakuten CEO Hiroshi Mikitani, highlighting the growth potential in the country's budget travel market.
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"Inbound travelers are growing very, very rapidly. I think we're going to reach 20 million by 2020," he said. Over 11 million international travelers visited the country in 2013.
Regulatory environment to improve
Japan's aviation market remains tightly controlled by the government which has created barriers for both domestic and foreign competitors through protectionist policies and by limiting landing slots and airport access.