Skymark Airlines [BC/SKY] will ask ANA Holdings, parent of All Nippon Airways [NH/ANA] for a partnership as early as next week, according to a Nikkei report. Japan's struggling third largest carrier had only revealed on November 21st that they were seeking help from Japan Airlines [JL/JAL] in the form of a broad code-share pact (Skymark in talks with JAL for broad tie-up.). However, the government's Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) decided to postpone granting permission, and instead has since been pushing Skymark to partner with ANA as well.
If roughly 20% of its seats are sold to ANA and JAL, respectively, it could generate an estimated annual 16 billion JPY for the cash-strapped airline. However, Skymark's President and CEO Shinichi Nishikubo expressed his displeasure, repeating many times that partnering with both "defied common sense and is divorced from the logic of private-sector enterprise," adding "For this time, we'll be compromising with the authorities," citing the dual-partnership scenario is orchestrated by the MLIT. This would delay code-share launch from February to late March, the beginning of the Summer 2015 timetable, at earliest.
From a consumer's point of view, Skymark's full independence is crucial to keeping prices low at heavily-regulated Tokyo/Haneda [HND/RJTT]. But with that now almost impossible with cash reserves quickly running low, the next best scenario would be a JAL partnership. Slot-count-wise, JAL controls 40.0% at 184.5 slot-pairs and All Nippon Airways [NH/ANA] 37.4% at 172.5 slot-pairs, while Skymark holds 7.8% with 36 slot-pairs. However, if the slots of AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ], all of which code-share with ANA throughout their networks and are de facto controlled by Japan's largest carrier (New Star Flyer President is from ANA.) are combined, ANA's share rises to 52.2%. A Skymark partnership would increase JAL's share to 47.8% against ANA's, which would maintain close competition.
On the other hand, the other way around would have a detrimental effect, where ANA would control 60% and JAL remaining at only 40%. And despite knowing this, the MLIT has been pushing for a de facto takeover of Skymark by ANA. The biggest reason behind this is that the current Liberal Democratic Party (LDP)-controlled government wants to portrait the then-Democratic Party of Japan (DPJ)-led government's massive bailout of JAL from their 2010 bankruptcy, one of the nation's most spectacular corporate failures, a misuse of taxpayer's money. And more, JAL accomplished a remarkable turnaround, and staunch LDP conservatives are willing to do whatever they can to dilute JAL's success.
Hence ANA's awarding of eight slot-pairs when domestic slot-pairs at Haneda were increased by 25 in March 2013. That time, Air Do received two, Solaseed Air three, Star Flyer five, while Skymark was awarded four and JAL only three. But with ANA virtually controlling the former three through minority investments, code-sharing, and coordinating schedules, they virtually received 18 slot-pairs at their disposal. For international slot-pairs that were awarded in March 2014, ANA received 11 (ANA's Summer 2014 international expansion.) while JAL only five. ANA has clearly been the government's favorite.
A JAL spokesperson has said "If it was a request from the MLIT, we won't say anything," adding the second largest domestic carrier is willing to code-share even with ANA joining. However, ANA has been saying "In no way will we let a JAL/Skymark partnership happen," and sources say that ANA is only seeking for a sole-partner scenario where ANA would invest in Skymark to have managerial influence over routes and prices it operates, replicating what it did with Air Do, Solaseed Air, and Star Flyer and how it controls them. However, for Mr. Nishikubo, who has often said out loud "We take great pride that we have been independent without the help of any major carriers, which has enabled us to change the industry significantly," joining the likes of the three young carriers under ANA is the last thing they will be looking into.
An MLIT official has been quoted as saying "We want them to do whatever they can to remain the third force." However, after the December 14th snap elections for Lower House seats, where the LDP is still widely expected to win with opposition parties still unorganized and unprepared, political fiddling could get even stronger. Mr. Nishikubo has also confirmed that they are currently talking with four investment funds to sell up to 25% of its shares in January to raise cash, though adding that the money would be used to pay early-return penalties for some of its leased Boeing 737s that will be disposed of, and to stay afloat until the code-share pact comes into effect. It illustrates the rapidly deteriorating financial state of the airline.
Unfortunately for Skymark, with ANA enjoying strong lobbying power with the current government, a deal which could be acceptable to Mr. Nishikubo is unlikely to bear fruit too soon. And the longer it takes, Skymark's financial situation would only become worse. Or maybe some politicians and ANA are hoping for that scenario, where the only way out for Mr. Nishikubo would be a de facto ANA takeover? The government should be regulating, not fiddling with aviation politics. Consumer's should be put first, not the interests of politicians or mega corporations. I certainly do hope they can reach a sensible solution, but I'm afraid Japanese politics is not there yet.
Source: Nikkei Shimbun, December 9th. (in Japanese)
Source: NHK, December 10th. (in Japanese)
Source: Skymark Airlines, December 10th. (PDF; in Japanese)
Source: Skymark Airlines, December 10th. (PDF; in Japanese)
Source: Nikkei Shimbun, December 10th. (in Japanese)
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| Airbus A330-343E JA330A taxies at Haneda. Skymark's introduction of the type (Skymark Airlines inaugurates Airbus A330 service.) reduced load factors, and the recent negative publicity is further hurting figures. (Photo: Ryosuke Yano) |
If roughly 20% of its seats are sold to ANA and JAL, respectively, it could generate an estimated annual 16 billion JPY for the cash-strapped airline. However, Skymark's President and CEO Shinichi Nishikubo expressed his displeasure, repeating many times that partnering with both "defied common sense and is divorced from the logic of private-sector enterprise," adding "For this time, we'll be compromising with the authorities," citing the dual-partnership scenario is orchestrated by the MLIT. This would delay code-share launch from February to late March, the beginning of the Summer 2015 timetable, at earliest.
From a consumer's point of view, Skymark's full independence is crucial to keeping prices low at heavily-regulated Tokyo/Haneda [HND/RJTT]. But with that now almost impossible with cash reserves quickly running low, the next best scenario would be a JAL partnership. Slot-count-wise, JAL controls 40.0% at 184.5 slot-pairs and All Nippon Airways [NH/ANA] 37.4% at 172.5 slot-pairs, while Skymark holds 7.8% with 36 slot-pairs. However, if the slots of AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ], all of which code-share with ANA throughout their networks and are de facto controlled by Japan's largest carrier (New Star Flyer President is from ANA.) are combined, ANA's share rises to 52.2%. A Skymark partnership would increase JAL's share to 47.8% against ANA's, which would maintain close competition.
On the other hand, the other way around would have a detrimental effect, where ANA would control 60% and JAL remaining at only 40%. And despite knowing this, the MLIT has been pushing for a de facto takeover of Skymark by ANA. The biggest reason behind this is that the current Liberal Democratic Party (LDP)-controlled government wants to portrait the then-Democratic Party of Japan (DPJ)-led government's massive bailout of JAL from their 2010 bankruptcy, one of the nation's most spectacular corporate failures, a misuse of taxpayer's money. And more, JAL accomplished a remarkable turnaround, and staunch LDP conservatives are willing to do whatever they can to dilute JAL's success.
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| ANA wants to take advantage of its comfortable relationship with the current government to further widen its domestic share lead against JAL. It wants Skymark to come under ANA's umbrella, joining the likes of Air Do, Solaseed Air, and Star Flyer. (Photo: Aviation Wire) |
Hence ANA's awarding of eight slot-pairs when domestic slot-pairs at Haneda were increased by 25 in March 2013. That time, Air Do received two, Solaseed Air three, Star Flyer five, while Skymark was awarded four and JAL only three. But with ANA virtually controlling the former three through minority investments, code-sharing, and coordinating schedules, they virtually received 18 slot-pairs at their disposal. For international slot-pairs that were awarded in March 2014, ANA received 11 (ANA's Summer 2014 international expansion.) while JAL only five. ANA has clearly been the government's favorite.
A JAL spokesperson has said "If it was a request from the MLIT, we won't say anything," adding the second largest domestic carrier is willing to code-share even with ANA joining. However, ANA has been saying "In no way will we let a JAL/Skymark partnership happen," and sources say that ANA is only seeking for a sole-partner scenario where ANA would invest in Skymark to have managerial influence over routes and prices it operates, replicating what it did with Air Do, Solaseed Air, and Star Flyer and how it controls them. However, for Mr. Nishikubo, who has often said out loud "We take great pride that we have been independent without the help of any major carriers, which has enabled us to change the industry significantly," joining the likes of the three young carriers under ANA is the last thing they will be looking into.
An MLIT official has been quoted as saying "We want them to do whatever they can to remain the third force." However, after the December 14th snap elections for Lower House seats, where the LDP is still widely expected to win with opposition parties still unorganized and unprepared, political fiddling could get even stronger. Mr. Nishikubo has also confirmed that they are currently talking with four investment funds to sell up to 25% of its shares in January to raise cash, though adding that the money would be used to pay early-return penalties for some of its leased Boeing 737s that will be disposed of, and to stay afloat until the code-share pact comes into effect. It illustrates the rapidly deteriorating financial state of the airline.
Unfortunately for Skymark, with ANA enjoying strong lobbying power with the current government, a deal which could be acceptable to Mr. Nishikubo is unlikely to bear fruit too soon. And the longer it takes, Skymark's financial situation would only become worse. Or maybe some politicians and ANA are hoping for that scenario, where the only way out for Mr. Nishikubo would be a de facto ANA takeover? The government should be regulating, not fiddling with aviation politics. Consumer's should be put first, not the interests of politicians or mega corporations. I certainly do hope they can reach a sensible solution, but I'm afraid Japanese politics is not there yet.
Source: Nikkei Shimbun, December 9th. (in Japanese)
Source: NHK, December 10th. (in Japanese)
Source: Skymark Airlines, December 10th. (PDF; in Japanese)
Source: Skymark Airlines, December 10th. (PDF; in Japanese)
Source: Nikkei Shimbun, December 10th. (in Japanese)
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