All Nippon Airways wants to be a major force in Japan's emerging budget travel market - but only on its own terms.
The Japanese carrier announced on 25 June that it would buy out AirAsia's 49% stake in Tokyo Narita-based AirAsia Japan for Y2.45 billion ($24.7 million), with the joint venture to formally end on 31 October.
AirAsia Japan has been a major disappointment to both its shareholders. The carrier launched services in August last year and recorded a first quarter loss of ringgit (M$) 27 million ($8.54 million) that was largely attributed to high marketing costs.
In recent weeks, however, it become painfully clear that the two shareholders were not able to agree on the way forward for the budget carrier.
Senior ANA executives publicly expressed their frustrations that AirAsia's online sales model and lower service levels were not acceptable to the Japanese market, while AirAsia bemoaned disagreements on how to operate a low-cost carrier.
Despite the end of the AirAsia relationship, ANA made it clearer earlier this year that it would pursue a "multi-brand strategy" for its core airline businesses, and signalled that it would work on improvements to its low-cost airline businesses.
With AirAsia Japan now out of the picture, Osaka Kansai-based Peach Aviation could become the main vehicle for ANA to approach the budget market.
Peach, in which ANA holds a 38.6% stake, seems to have been more successful than its Narita-based stablemate.
Paul Wan, Hong Kong-based regional head of transport for brokerage CLSA, says that one of the reasons for the success has been a captive market.
"Peach is more successful for now due to the fact that it is the only Kansai-based LCC," he says.
In comparison, AirAsia Japan started shortly after the launch of fellow Narita-based budget carrier Jetstar Japan, which is backed by Japan Airlines and Qantas.
Peach has also had the benefit of less interference from ANA itself as "parent intervention is negative to LCC model in most cases", adds Wan.
AirAsia Japan, on the other hand, had many of its key managers - including its chief executive and chief financial officer - appointed from ANA's talent pool.
In addition, Peach appears to have avoided cannibalising ANA's core segment of business travellers. In February, the airline's chief commercial officer Luke Lovegrove told Flightglobal Pro that the airline has "demonstrated that we're developing a new set of passengers and a new growth segment for Japan".
Wan adds that "there definitely is a big upside from this segment, but ANA believes they are different segments, which is true to a certain extent as business travellers are very sticky in nature".
Peach has also had the benefit of a more developed international market. Moreover, it gained from being able to tap into inbound demand from South Korea, Taiwan and Hong Kong.
Peach has a significant growth trajectory ahead of it as well. Flightglobal's Ascend Online database shows that the airline has six Airbus A320s in service and 11 more on order.
That seems to have convinced ANA that it does not need to partner a pan-Asian LCC brand like AirAsia to succeed in the low-cost market.
ANA says that it still intends to operate an LCC from Narita after the joint venture concludes, and that an announcement of the new brand is expected in late July.
That could include the possibility of merging the operation with Peach to create a single budget carrier brand across Japan, which could, in future, also stretch to other markets in the region.
But ANA will be cognisant that others are also looking for their own slice of the emerging low-cost market.
Although Tokyo has yet to issue China's Spring Airlines an air operator's certificate, the carrier is planning to launch its Japanese offshoot - which will be based at Narita - later this year. It has plans to expand to a fleet of 22 Boeing 737-800s.
Jetstar Japan is also gearing up for major expansion. Flightglobal's Ascend Online database shows that it is due to take delivery of 12 A320s by the end of 2014. This will nearly double its current fleet of 13 aircraft.
AirAsia's Tony Fernandes also says that he still sees "tremendous opportunity for an LCC to succeed" in Japan, and has raised the prospect that it could re-enter the market in future.
CLSA's Wan says that Japan is "still a very attractive market for AirAsia" as the domestic market is still high yielding and there remains minimal LCC penetration.
For ANA, that means that while it may seek to be the dominant player, others will soon be making their own mark in the budget market.