Skymark Airlines [BC/SKY] (Skymark to file for bankruptcy.) has reportedly decided to accept sponsorship from ANA Holdings, parent of Japan's largest carrier All Nippon Airways [NH/ANA]. Over 20 firms, including AirAsia [AK/AXM] and ANA (ANA and AirAsia bid to save Skymark.), had submitted proposals to help Japan's third largest carrier out of bankruptcy. ANA would co-sponsor the embattled carrier with investment fund Integral Corporation, which has already pledged 9 billion JPY to keep Skymark flying while it restructures. Details will be released next week, according to people close to the matter.
Under the plan, Integral would control 50% or more, while ANA Holdings and its partner financial institutions would together hold the remaining 50% or less (Skymark likely to accept ANA sponsorship.). ANA's actual shareholding would be kept under 20% so that Skymark would not need to relinquish their 36 lucrative slot-pairs at Tokyo/Haneda [HND/RJTT], which is required by Japan's Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) if that figure exceeds 20%. An initial capital of 18 billion JPY is to be injected into the ailing carrier; 9 billion JPY from Integral, 3.5 billion JPY from ANA, and the rest from ANA's partner financial firms.
Skymark also considered remaining independent from other airlines with support from only Integral, and the equity firm mulled being its sole sponsor. However, total liabilities grew to 316 billion JPY (Skymark's total debts skyrocket to 300 billion JPY.) after all creditors filed claims, including 700 million USD (84 billion JPY) from Airbus for the Airbus A380 cancellation (Skymark hopes to settle Airbus A380 penalty in October.) and 900 million USD (108 billion JPY) from aircraft lessor Intrepid Aviation for scrapping A330 contracts (Skymark terminates all Airbus A330 leases.). With Skymark's total assets having dwindled to just 5 billion JPY in February, management apparently deemed it difficult to reduce the charges without the negotiation power of a strong backing airline.
For ANA, the incentive had always been Skymark's 36 slot-pairs, or 7.8% of all domestic slot-pairs at heavily-regulated Haneda. Their proposal had called for sending in ANA's executives as advisers, reducing Skymark's fleet to around 20 aircraft, implementing extensive code-sharing, joint ticket sales, joint fuel purchases, joint crew training, and aligning its network to complement that of ANA's, virtually transforming Skymark into a feeder carrier for ANA, replicating how it controls AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ]. Archrival Japan Airlines [JL/JAL] holds 40% of domestic slot-pairs (184.5) at Haneda with ANA 37.4% (172.5), however, the latter literally dominates 52.2% when combining those of Air Do, Solaseed Air, and Star Flyer. Adding Skymark would put all post-deregulation start-ups at Haneda under de facto ANA control and raise its share of slots to a whopping 60%.
However, ANA and Integral's agreement is reportedly fragile with conflicting interests and differences yet to be solved. ANA together with its partner banks initially demanded a 80% stake in Skymark, in effect taking full control, an idea vehemently opposed by Integral, which wants to rebuild Skymark as an independent carrier. Eventually re-listing the carrier and keeping all jobs are some of the terms that have been agreed on. Regulator MLIT has also said it would limit any ANA investment in Skymark to five years to prevent a return to the ANA/JAL duopoly era at Haneda, though this may be invalidated by the governing Liberal Democratic Party (LDP), with which ANA enjoys a cozy relationship. But if Integral holds majority control, sponsoring Skymark will not fully go in protectionist ANA's favor, which obviously wants to keep Skymark under its influence once and for all and keep genuine domestic competition out of bread-and-butter Haneda for as long as possible.
Time is running out. Skymark has between April 22nd and May 8th to negotiate with creditors to reduce its liabilities. A corporation rehabilitation plan must be handed in to the Tokyo District Court by May 29th, and it would need majority go-ahead at a creditor's meeting that would be held in late June for the plan to be implemented by the end of July. A new brand is also currently under consideration for launch as early as summer (Skymark hints at new brand: SKY bee?). In any case, the interests of the flying public seem to be out of the picture, completely.
Source: Nikkei Shimbun, April 15th. (in Japanese)
Source: Nikkei Shimbun, April 18th. (in Japanese)
Source: NHK, April 18th. (in Japanese)
Source: Asahi Shimbun, April 18th. (in Japanese)
Source: Sankei Shimbun, April 18th. (in Japanese)
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| Boeing 737-8HX JA737N prepares to depart from Naha while another Skymark 737 arrives into the Okinawa airport. The fleet of 27 narrow-body Boeings could be reduced to 20 if ANA's proposal goes through. (Photo: Ryosuke Yano) |
Under the plan, Integral would control 50% or more, while ANA Holdings and its partner financial institutions would together hold the remaining 50% or less (Skymark likely to accept ANA sponsorship.). ANA's actual shareholding would be kept under 20% so that Skymark would not need to relinquish their 36 lucrative slot-pairs at Tokyo/Haneda [HND/RJTT], which is required by Japan's Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) if that figure exceeds 20%. An initial capital of 18 billion JPY is to be injected into the ailing carrier; 9 billion JPY from Integral, 3.5 billion JPY from ANA, and the rest from ANA's partner financial firms.
Skymark also considered remaining independent from other airlines with support from only Integral, and the equity firm mulled being its sole sponsor. However, total liabilities grew to 316 billion JPY (Skymark's total debts skyrocket to 300 billion JPY.) after all creditors filed claims, including 700 million USD (84 billion JPY) from Airbus for the Airbus A380 cancellation (Skymark hopes to settle Airbus A380 penalty in October.) and 900 million USD (108 billion JPY) from aircraft lessor Intrepid Aviation for scrapping A330 contracts (Skymark terminates all Airbus A330 leases.). With Skymark's total assets having dwindled to just 5 billion JPY in February, management apparently deemed it difficult to reduce the charges without the negotiation power of a strong backing airline.
 |
| Domestic-configured Boeing 777-281/ER JA742A taxies for departure from Haneda. ANA will start retiring older 777-200s this year, with two to leave the fleet during FY2015. (Photo: Ryosuke Yano) |
For ANA, the incentive had always been Skymark's 36 slot-pairs, or 7.8% of all domestic slot-pairs at heavily-regulated Haneda. Their proposal had called for sending in ANA's executives as advisers, reducing Skymark's fleet to around 20 aircraft, implementing extensive code-sharing, joint ticket sales, joint fuel purchases, joint crew training, and aligning its network to complement that of ANA's, virtually transforming Skymark into a feeder carrier for ANA, replicating how it controls AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ]. Archrival Japan Airlines [JL/JAL] holds 40% of domestic slot-pairs (184.5) at Haneda with ANA 37.4% (172.5), however, the latter literally dominates 52.2% when combining those of Air Do, Solaseed Air, and Star Flyer. Adding Skymark would put all post-deregulation start-ups at Haneda under de facto ANA control and raise its share of slots to a whopping 60%.
However, ANA and Integral's agreement is reportedly fragile with conflicting interests and differences yet to be solved. ANA together with its partner banks initially demanded a 80% stake in Skymark, in effect taking full control, an idea vehemently opposed by Integral, which wants to rebuild Skymark as an independent carrier. Eventually re-listing the carrier and keeping all jobs are some of the terms that have been agreed on. Regulator MLIT has also said it would limit any ANA investment in Skymark to five years to prevent a return to the ANA/JAL duopoly era at Haneda, though this may be invalidated by the governing Liberal Democratic Party (LDP), with which ANA enjoys a cozy relationship. But if Integral holds majority control, sponsoring Skymark will not fully go in protectionist ANA's favor, which obviously wants to keep Skymark under its influence once and for all and keep genuine domestic competition out of bread-and-butter Haneda for as long as possible.
Time is running out. Skymark has between April 22nd and May 8th to negotiate with creditors to reduce its liabilities. A corporation rehabilitation plan must be handed in to the Tokyo District Court by May 29th, and it would need majority go-ahead at a creditor's meeting that would be held in late June for the plan to be implemented by the end of July. A new brand is also currently under consideration for launch as early as summer (Skymark hints at new brand: SKY bee?). In any case, the interests of the flying public seem to be out of the picture, completely.
Source: Nikkei Shimbun, April 15th. (in Japanese)
Source: Nikkei Shimbun, April 18th. (in Japanese)
Source: NHK, April 18th. (in Japanese)
Source: Asahi Shimbun, April 18th. (in Japanese)
Source: Sankei Shimbun, April 18th. (in Japanese)
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