On January 9th and 10th, the Yomiuri Shimbun and Asahi Shimbun reported Skymark Airlines [BC/SKY] had given up on restructuring themselves on their own, and that Japan's struggling third largest carrier is seeking to come under the umbrella of ANA Holdings, parent of All Nippon Airways [NH/ANA].
Quoting senior ANA officials familiar with the matter, ANA would take control of a few points short of 20% of Skymark's shares on condition that the Airbus A380 cancellation penalty (Skymark hopes to settle Airbus A380 penalty in October.) is settled and current senior executives, including President and CEO Shinichi Nishikubo, are replaced by those from ANA. A 20% or more ownership change of carriers holdings slots at Tokyo/Haneda [HND/RJTT] would require it to relinquish them for redistribution. The plan also calls for Development Bank of Japan and Sumitomo Mitsui Banking (SMBC) to provide financial support. The articles also say the transaction already has government rapport.
However, Skymark quickly denied the reports. According to Aviation Wire, "We have asked them for a code-share pact, but nothing regarding an investment. Nothing about management change either," said a senior official at Skymark. An interview by Kyodo Press also quoted a Skymark spokesperson saying "There is no change in our independent management policy and we have no plan to be an affiliate of ANA," though adding "But we are considering all options." An ANA official was also quoted as saying "It's not something we decide. If they bring it up to us, we will consider it."
In December, Japan's Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) was orchestrating a Skymark tie-up with both ANA and Japan Airlines [JL/JAL] (Skymark forced to seek ANA & JAL dual tie-up.) in a bid to keep Skymark as Japan's third force, after the troubled airline started non-investment partnership talks with JAL (Skymark in talks with JAL for broad tie-up.). Also, the Liberal Democratic Party (LDP)-controlled government is not comfortable about JAL, bailed out in 2010 by then-Democratic Party of Japan (DPJ)-led regime, expanding through the tie-up. Under the scheme, both ANA and JAL would place their codes on Skymark's five routes from Haneda from the Summer 2015 timetable for five years, together selling about 20% of its seats, generating an estimated annual 8 billion JPY.
Skymark is also negotiating with four financial institutions for capital injection through third-party allocation of new shares. The number of shares will be increased by up to 25%, and they have called for an extraordinary (emergency) shareholders' meeting on February 18th to receive approval.
However, Skymark's financial health seems to be deteriorating faster than even they had estimated themselves; system-wide load factor for December was 54.5%, its worst record since starting to post figures in April 2010. Of their 23 non-stop routes, a dozen turned out less than 50%, and four, Kobe [UKB/RJBE]– Kagoshima [KOJ/RJFK], Sendai [SDJ/RJSS] – Sapporo/New Chitose [CTS/RJCC], Kobe – Sendai, and Yonago [YGJ/RJOH] – Okinawa/Naha [OKA/ROAH] showed less than 40%. Most critically, none of its core Haneda routes exceeded 70%. The five routes from the downtown Tokyo airport have performed in the 70-90% range, generating roughly 80% of their revenue.
Skymark burned 2.5 billion JPY in cash reserves just in the six months to September 2014, bringing down the total on hand to 4.5 billion JPY, but they are probably now bleeding at an even faster rate. Adding to the already fierce competition with legacy carriers as well as the expanding LCCs, the struggling airline's continued negative media coverage is apparently keeping passengers from choosing to fly with them. Skymark has no loyalty program, which was planned but shelved and is now considered one of their biggest mistakes in a country where brand affinity counts significantly.
In other news, Airbus is preparing to file a lawsuit against Skymark for the A380 cancellation (Skymark's Airbus A380 order in jeopardy.) with a commerce court in the U.K., seeking around 7 million USD (83.9 billion JPY), in addition to already-made deposits amounting to 26.5 billion JPY, which are unlikely to be refunded.
As I have reiterated, Skymark's independence is crucial to keeping prices low at heavily-regulated Haneda. But with that now almost impossible with time and cash running out, the next best scenario would be a ANA/JAL dual or JAL solo 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, when 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%.
An ANA investment would be detrimental to the flying public. Skymark would become merely a feeder carrier for ANA, joining the likes of three other minority-owned carriers, ANA would virtually control a dominant 60% of slot-pairs at Haneda, higher airfares will come back on some routes, and it would also translate to the failure of aviation deregulation in Japan where the ANA/JAL duopoly persists.
Source: Asahi Shimbun, December 15th. (in Japanese)
Source: Yomiuri Shimbun, January 9th. (in Japanese)
Source: Aviation Wire, January 9th. (in Japanese)
Source: Asahi Shimbun, January 10th. (in Japanese)
Source: Skymark Airlines, January 10th. (PDF; in Japanese)
Source: Mainichi Shimbun, January 11th. (in English)
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| Boeing 737-8FZ(WL) JA737U awaits its next flight at Haneda. Skymark controls 36 prized slot-pairs at the heavily-regulated downtown Tokyo airport. (Photo: Ryosuke Yano) |
Quoting senior ANA officials familiar with the matter, ANA would take control of a few points short of 20% of Skymark's shares on condition that the Airbus A380 cancellation penalty (Skymark hopes to settle Airbus A380 penalty in October.) is settled and current senior executives, including President and CEO Shinichi Nishikubo, are replaced by those from ANA. A 20% or more ownership change of carriers holdings slots at Tokyo/Haneda [HND/RJTT] would require it to relinquish them for redistribution. The plan also calls for Development Bank of Japan and Sumitomo Mitsui Banking (SMBC) to provide financial support. The articles also say the transaction already has government rapport.
However, Skymark quickly denied the reports. According to Aviation Wire, "We have asked them for a code-share pact, but nothing regarding an investment. Nothing about management change either," said a senior official at Skymark. An interview by Kyodo Press also quoted a Skymark spokesperson saying "There is no change in our independent management policy and we have no plan to be an affiliate of ANA," though adding "But we are considering all options." An ANA official was also quoted as saying "It's not something we decide. If they bring it up to us, we will consider it."
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| Airbus A320-211 JA8394 taxies at Haneda. Only a dozen A320s remain with the carrier, however, phase-out is gradual as ANA now needs more narrow-body aircraft. The first of 30 A321/320neos on order will arrive in FY2016. ANA wants to take advantage of its comfortable relationship with the current government to further widen its market share at Haneda against JAL. (Photo: Ryosuke Yano) |
In December, Japan's Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) was orchestrating a Skymark tie-up with both ANA and Japan Airlines [JL/JAL] (Skymark forced to seek ANA & JAL dual tie-up.) in a bid to keep Skymark as Japan's third force, after the troubled airline started non-investment partnership talks with JAL (Skymark in talks with JAL for broad tie-up.). Also, the Liberal Democratic Party (LDP)-controlled government is not comfortable about JAL, bailed out in 2010 by then-Democratic Party of Japan (DPJ)-led regime, expanding through the tie-up. Under the scheme, both ANA and JAL would place their codes on Skymark's five routes from Haneda from the Summer 2015 timetable for five years, together selling about 20% of its seats, generating an estimated annual 8 billion JPY.
Skymark is also negotiating with four financial institutions for capital injection through third-party allocation of new shares. The number of shares will be increased by up to 25%, and they have called for an extraordinary (emergency) shareholders' meeting on February 18th to receive approval.
However, Skymark's financial health seems to be deteriorating faster than even they had estimated themselves; system-wide load factor for December was 54.5%, its worst record since starting to post figures in April 2010. Of their 23 non-stop routes, a dozen turned out less than 50%, and four, Kobe [UKB/RJBE]– Kagoshima [KOJ/RJFK], Sendai [SDJ/RJSS] – Sapporo/New Chitose [CTS/RJCC], Kobe – Sendai, and Yonago [YGJ/RJOH] – Okinawa/Naha [OKA/ROAH] showed less than 40%. Most critically, none of its core Haneda routes exceeded 70%. The five routes from the downtown Tokyo airport have performed in the 70-90% range, generating roughly 80% of their revenue.
Skymark burned 2.5 billion JPY in cash reserves just in the six months to September 2014, bringing down the total on hand to 4.5 billion JPY, but they are probably now bleeding at an even faster rate. Adding to the already fierce competition with legacy carriers as well as the expanding LCCs, the struggling airline's continued negative media coverage is apparently keeping passengers from choosing to fly with them. Skymark has no loyalty program, which was planned but shelved and is now considered one of their biggest mistakes in a country where brand affinity counts significantly.
 |
| Boeing 737-846(WL) JA307J lines up for takeoff from New Chitose near Sapporo. The last thing JAL wants to see is a ANA/Skymark tie-up, further widening the gap at Haneda. (Photo: Ryosuke Yano) |
In other news, Airbus is preparing to file a lawsuit against Skymark for the A380 cancellation (Skymark's Airbus A380 order in jeopardy.) with a commerce court in the U.K., seeking around 7 million USD (83.9 billion JPY), in addition to already-made deposits amounting to 26.5 billion JPY, which are unlikely to be refunded.
As I have reiterated, Skymark's independence is crucial to keeping prices low at heavily-regulated Haneda. But with that now almost impossible with time and cash running out, the next best scenario would be a ANA/JAL dual or JAL solo 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, when 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%.
An ANA investment would be detrimental to the flying public. Skymark would become merely a feeder carrier for ANA, joining the likes of three other minority-owned carriers, ANA would virtually control a dominant 60% of slot-pairs at Haneda, higher airfares will come back on some routes, and it would also translate to the failure of aviation deregulation in Japan where the ANA/JAL duopoly persists.
Source: Asahi Shimbun, December 15th. (in Japanese)
Source: Yomiuri Shimbun, January 9th. (in Japanese)
Source: Aviation Wire, January 9th. (in Japanese)
Source: Asahi Shimbun, January 10th. (in Japanese)
Source: Skymark Airlines, January 10th. (PDF; in Japanese)
Source: Mainichi Shimbun, January 11th. (in English)
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