Skymark Airlines [BC/SKY] will reportedly scrap its planned three-way code-sharing pact involving All Nippon Airways [NH/ANA] and Japan Airlines [JL/JAL] (Skymark takes ANA & JAL dual tie-up, axes Sendai – Sapporo.), and is instead searching for a single sponsor airline that would "cooperate comprehensively including joint fuel purchases, joint crew training, and code-sharing," according to documents submitted to the Tokyo District Court for bankruptcy protection (Skymark to file for bankruptcy.). It did not specify any airline.
The planned three-way code-share deal was aimed at filling seats of Skymark's Airbus A330s, but the aircraft have now been quickly phased-out (Skymark Airbus A330 operates last revenue flight.), most likely permanently. As Skymark dumped capacity on trunk routes with the A330 (Skymark Airlines inaugurates Airbus A330 service.), they often had to slash price of the A330s' premium seats to below that of rivals' economy fares; the more they flew the A330, the more they hemorrhaged.
The documents also said that Skymark's cash reserves as of January 28th stood at just 300 million JPY. That figure was 7 billion JPY only in March 2014 and 4.5 billion JPY in September (Skymark braces for 13.7 billion JPY loss in FY2014.), illustrating how rapidly their financial health was deteriorating. Former President and CEO Shinichi Nishikubo had also personally lent 700 million JPY to his airline and that cash was used to pay employees' January salaries. But with payments of 4 billion JPY in aircraft leases and landing fees coming up at the end of January, Skymark sought for bankruptcy protection.
Total liabilities stood at 71.1 billion JPY, not including the 700 million USD in penalties Airbus is seeking for the cancellation of the Airbus A380 order (Skymark hopes to settle Airbus A380 penalty in October.). As of now, the biggest creditors are aircraft lessors GECAS at 125.1 million USD, AWAS at 116.5 million USD, Aviation Capital Group at 63.4 million USD, and Babcock and Brown at 63.0 million USD. Investment fund Integral Corporation will provide finance and help the airline continue flying with a reduced schedule (Skymark to cut 15% of flights, ground all Airbus A330s.) while it reorganizes.
Meanwhile, Skymark's shares plunged a record 94% in just three business days after its bankruptcy filing; what was 317 JPY per share on January 28th finished February 2nd at just 19 JPY. They will be de-listed on March 1st. Only four years ago, Skymark was the third most profitable airline in the world.
With Skymark's 36 lucrative slot-pairs at Tokyo/Haneda [HND/RJTT] again in the center of the picture, both ANA and JAL have expressed interest in aiding Japan's troubled third largest carrier. Foreign airlines may also consider investment, including pan-Asian LCC AirAsia Group (Is AirAsia considering a Skymark takeover?) and Delta Air Lines [DL/DAL], which reportedly carried out their due diligence last year (Skymark's fate: AirAsia, ANA, Delta, or...?) but scrapped it after then-chief Mr. Nishikubo was unwilling to give up any managerial control.
However, the controversial 8.10 Paper prohibits JAL, which was bailed out in 2010 by then-Democratic Party-controlled government, from making any significant investments until FY2017. Further, ownership change exceeding 20% will necessitate relinquishing Skymark's 36 Haneda slot-pairs, which decreases the appetite of carriers abroad (Skymark's fate: MLIT discourages foreign investment.). They would probably want the maximum possible at 33% to confirm managerial influence. So again, that puts ANA as the only airline in a comfortable position to assist (Running out of time: Will Skymark join ANA?).
JAL controls 40.0% of domestic slot-pairs (184.5) at Haneda with ANA holding 37.4% (172.5), however, the latter virtually controls 52.2% when combining those of AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ], in which ANA owns minority stakes and implements extensive code-sharing and schedule coordinating. ANA would replicate that with Skymark. Placing the cash-strapped airline under the umbrella of Japan's largest airline would virtually have ANA dominate slots at Haneda controlling 60.0%, which is the last thing JAL wants to see.
And needless to say, a return to the ANA/JAL duopoly era would be detrimental to the flying public.
Source: Nikkei Shimbun, February 2nd. (in Japanese)
Source: Yomiuri Shimbun, February 3rd. (in Japanese)
Source: Asahi Shimbun, February 3rd. (in Japanese)
Source: Reuters, February 3rd. (in English)
The planned three-way code-share deal was aimed at filling seats of Skymark's Airbus A330s, but the aircraft have now been quickly phased-out (Skymark Airbus A330 operates last revenue flight.), most likely permanently. As Skymark dumped capacity on trunk routes with the A330 (Skymark Airlines inaugurates Airbus A330 service.), they often had to slash price of the A330s' premium seats to below that of rivals' economy fares; the more they flew the A330, the more they hemorrhaged.
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| Is ANA the carrier implied in Skymark's documents that would invest in and cooperate comprehensively with the troubled airline? (Photo: Aviation Wire) |
The documents also said that Skymark's cash reserves as of January 28th stood at just 300 million JPY. That figure was 7 billion JPY only in March 2014 and 4.5 billion JPY in September (Skymark braces for 13.7 billion JPY loss in FY2014.), illustrating how rapidly their financial health was deteriorating. Former President and CEO Shinichi Nishikubo had also personally lent 700 million JPY to his airline and that cash was used to pay employees' January salaries. But with payments of 4 billion JPY in aircraft leases and landing fees coming up at the end of January, Skymark sought for bankruptcy protection.
Total liabilities stood at 71.1 billion JPY, not including the 700 million USD in penalties Airbus is seeking for the cancellation of the Airbus A380 order (Skymark hopes to settle Airbus A380 penalty in October.). As of now, the biggest creditors are aircraft lessors GECAS at 125.1 million USD, AWAS at 116.5 million USD, Aviation Capital Group at 63.4 million USD, and Babcock and Brown at 63.0 million USD. Investment fund Integral Corporation will provide finance and help the airline continue flying with a reduced schedule (Skymark to cut 15% of flights, ground all Airbus A330s.) while it reorganizes.
Meanwhile, Skymark's shares plunged a record 94% in just three business days after its bankruptcy filing; what was 317 JPY per share on January 28th finished February 2nd at just 19 JPY. They will be de-listed on March 1st. Only four years ago, Skymark was the third most profitable airline in the world.
With Skymark's 36 lucrative slot-pairs at Tokyo/Haneda [HND/RJTT] again in the center of the picture, both ANA and JAL have expressed interest in aiding Japan's troubled third largest carrier. Foreign airlines may also consider investment, including pan-Asian LCC AirAsia Group (Is AirAsia considering a Skymark takeover?) and Delta Air Lines [DL/DAL], which reportedly carried out their due diligence last year (Skymark's fate: AirAsia, ANA, Delta, or...?) but scrapped it after then-chief Mr. Nishikubo was unwilling to give up any managerial control.
However, the controversial 8.10 Paper prohibits JAL, which was bailed out in 2010 by then-Democratic Party-controlled government, from making any significant investments until FY2017. Further, ownership change exceeding 20% will necessitate relinquishing Skymark's 36 Haneda slot-pairs, which decreases the appetite of carriers abroad (Skymark's fate: MLIT discourages foreign investment.). They would probably want the maximum possible at 33% to confirm managerial influence. So again, that puts ANA as the only airline in a comfortable position to assist (Running out of time: Will Skymark join ANA?).
JAL controls 40.0% of domestic slot-pairs (184.5) at Haneda with ANA holding 37.4% (172.5), however, the latter virtually controls 52.2% when combining those of AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ], in which ANA owns minority stakes and implements extensive code-sharing and schedule coordinating. ANA would replicate that with Skymark. Placing the cash-strapped airline under the umbrella of Japan's largest airline would virtually have ANA dominate slots at Haneda controlling 60.0%, which is the last thing JAL wants to see.
And needless to say, a return to the ANA/JAL duopoly era would be detrimental to the flying public.
Source: Nikkei Shimbun, February 2nd. (in Japanese)
Source: Yomiuri Shimbun, February 3rd. (in Japanese)
Source: Asahi Shimbun, February 3rd. (in Japanese)
Source: Reuters, February 3rd. (in English)
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