On October 2nd, Skymark Airlines (BC/SKY) admitted a report by Nikkei Shimbun which said Japan's third largest carrier and Airbus have started talks for a settlement for the canceled Airbus A380 order (Skymark's Airbus A380 order in jeopardy.). Representatives from both sides, including Skymark's President and CEO Shinichi Nishikubo and senior officials of the European planemaker, met in France on September 29th for the first time after the termination of the order.
On July 29th, Airbus unilaterally axed the contract for six A380s worth more than 2 billion USD at list prices after Skymark stopped making installment payments from April. It subsequently demanded the Japanese carrier pay a penalty estimated at 700 million USD (76 billion JPY), or come under the umbrella of a major carrier. In turn, Skymark said that Airbus was demanding an unreasonable cancellation fee.
During the new talks, the two agreed to reach a settlement by the end of October. According to Skymark, Airbus would consider the financial state of the troubled airline in discussing the penalty so that it can remain a listed company on the Tokyo Stock Exchange. It currently operates four A330s (Skymark Airlines inaugurates Airbus A330 service.) with another six to be delivered by September 2015, and though these are leased from Intrepid Aviation and not purchased from Airbus, the European planemaker confirmed that Skymark would continue to be a valued customer. News of possible settlement sent Skymark's shares up 11% on October 2nd, after the stock had lost nearly a third since the issue came to light in July.
Meanwhile, Skymark denied an Asahi Shimbun report that claimed both parties had reached a deal in principle, with the cancellation fee limited to somewhere between 20 to 23 billion JPY and that it would be paid from the already-made prepayments amounting to 26.5 billion JPY. Contractually, Airbus does not need to refund this, and penalties would come on top of this figure. The article claims that Airbus has found a buyer for the first two A380s (Skymark's first Airbus A380 completes maiden flight.) which were earmarked for Skymark, leading to easing the penalties. Skymark vehemently denied this, and stressed that talks have just commenced and no details of the settlement have been agreed on yet.
In July, Skymark had posted a staggering 5.7 billion JPY net loss for just the first quarter of FY2014, more than triple the amount they lost for the whole year of FY2013 (Skymark posts 5.7 billion JPY loss for 1Q FY2014.). Their cash reserves and near-term assets had declined to 7.2 billion JPY as of June, and the A380 penalty, depending on the figure, could force them into insolvency. However, if the above report turns out to be true, that could be avoided. Meanwhile, talks are well underway with various firms for potential investment and capital injection, but none will go ahead without knowing how big (or small) the penalty is. In any case, the industry is moving on and competition will only get more fierce, and Skymark's settlement with Airbus would only be their first step to get themselves back on track.
Reference: Aviation Wire, October 2nd. (in Japanese)
Reference: Asahi Shimbun, October 3rd. (in Japanese)
Reference: Nikkei Shimbun, October 3rd. (in Japanese)
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| Airbus A380-841 F-WWSL/JA380A takes off from Toulouse. Rumors have it that Airbus has found a buyer for the first two A380s that had been destined for Skymark, leading to eased talks. Who's buying them? (Photo: Airbus) |
On July 29th, Airbus unilaterally axed the contract for six A380s worth more than 2 billion USD at list prices after Skymark stopped making installment payments from April. It subsequently demanded the Japanese carrier pay a penalty estimated at 700 million USD (76 billion JPY), or come under the umbrella of a major carrier. In turn, Skymark said that Airbus was demanding an unreasonable cancellation fee.
During the new talks, the two agreed to reach a settlement by the end of October. According to Skymark, Airbus would consider the financial state of the troubled airline in discussing the penalty so that it can remain a listed company on the Tokyo Stock Exchange. It currently operates four A330s (Skymark Airlines inaugurates Airbus A330 service.) with another six to be delivered by September 2015, and though these are leased from Intrepid Aviation and not purchased from Airbus, the European planemaker confirmed that Skymark would continue to be a valued customer. News of possible settlement sent Skymark's shares up 11% on October 2nd, after the stock had lost nearly a third since the issue came to light in July.
Meanwhile, Skymark denied an Asahi Shimbun report that claimed both parties had reached a deal in principle, with the cancellation fee limited to somewhere between 20 to 23 billion JPY and that it would be paid from the already-made prepayments amounting to 26.5 billion JPY. Contractually, Airbus does not need to refund this, and penalties would come on top of this figure. The article claims that Airbus has found a buyer for the first two A380s (Skymark's first Airbus A380 completes maiden flight.) which were earmarked for Skymark, leading to easing the penalties. Skymark vehemently denied this, and stressed that talks have just commenced and no details of the settlement have been agreed on yet.
In July, Skymark had posted a staggering 5.7 billion JPY net loss for just the first quarter of FY2014, more than triple the amount they lost for the whole year of FY2013 (Skymark posts 5.7 billion JPY loss for 1Q FY2014.). Their cash reserves and near-term assets had declined to 7.2 billion JPY as of June, and the A380 penalty, depending on the figure, could force them into insolvency. However, if the above report turns out to be true, that could be avoided. Meanwhile, talks are well underway with various firms for potential investment and capital injection, but none will go ahead without knowing how big (or small) the penalty is. In any case, the industry is moving on and competition will only get more fierce, and Skymark's settlement with Airbus would only be their first step to get themselves back on track.
Reference: Aviation Wire, October 2nd. (in Japanese)
Reference: Asahi Shimbun, October 3rd. (in Japanese)
Reference: Nikkei Shimbun, October 3rd. (in Japanese)
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