On June 15th, the Tokyo District Court, where Skymark Airlines [BC/SKY] filed for bankruptcy protection (Skymark to file for bankruptcy.), approved both rehabilitation proposals for the embattled carrier for discussion at a creditors' meeting; one submitted by Skymark themselves that involves sponsorship by ANA Holdings, parent of All Nippon Airways [NH/ANA] (Skymark gives in to ANA; Japan reverts to duopoly.), and the other by Intrepid Aviation, aircraft lessor and Skymark's biggest creditor (Skymark and Intrepid submit rivaling revival plans.). In Japan, it is very unusual for multiple plans to be approved for consideration. The meeting will be held on August 5th.
Under the Skymark/ANA scheme, a total of 18 billion JPY would be injected into the bankrupt airline by Integral Corporation, UDS Airlines Investment, and ANA Holdings, which would in turn control 50.1%, 33.4%, and 16.5%, respectively. Six executives would sit on the board; Integral would select three, ANA two, and UDS one, while Integral would appoint the Chairman and UDS the President. The proposal would likely include reducing Skymark's network and fleet, implementing code-sharing, joint ticket sales, joint fuel purchases, and joint crew training with ANA, and gradually aligning its network to complement that of ANA's. This would virtually transform Skymark into another zombie feeder carrier, replicating how ANA controls AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ]. Debt repayment rate to those who claim over 1 million JPY is set at 5%.
Meanwhile, Intrepid's deal includes the same 18 billion JPY, however, the plan has been amended to have Integral as the sole provider of the injection. This effectively paves the way for non-investment sponsorship by foreign airlines, which could be more acceptable to the regulators who are still uncomfortable about allowing foreign investment in Japanese carriers at slot-restricted Tokyo/Haneda [HND/RJTT]. Skymark's biggest creditor is seeking 900 million USD (104 billion JPY) for scrapping seven Airbus A330 contracts (Skymark terminates all Airbus A330 leases.), and though it favored ANA sponsorship when Japan's largest airline said it could induct the A330s, it decided to submit its own proposal when it learned ANA would not take them. Debt repayment rate for those claiming over 1 million JPY has been increased from 3% to 5% or higher, matching that of the Skymark/ANA plan.
Intrepid is reportedly holding talks with a number of candidate sponsors, who would be willing to take up the grounded A330s. Rumors point to Delta Air Lines [DL/DAL] and Hainan Airlines [HU/CHH], and at least the former's President Ed Bastian confirmed they had been approached though declining to give any details. The Skyteam member has long wanted a partner in Japan, and fought hard and failed to lure then-bankrupt Japan Airlines [JL/JAL] from American Airlines [AA/AAL] and Oneworld back in 2010. However, times have changed and so may have Delta's priorities; Japan is a shrinking market and U.S. airlines are focusing more on China, and Delta is reportedly negotiating a deeper cooperation, if not a joint-venture (JV), with Skyteam partner Korean Air [KE/KAL]. Delta also recently decided to forfeit its Seattle-Tacoma [SEA/KSEA] slot-pair at Haneda, leaving only Los Angeles [LAX/KLAX].
In addition, though Delta may take the Rolls-Royce-powered A330s (their current A330s are Pratt & Whitney and General Electric), they have no interest in A380s (Skymark's Airbus A380 order in jeopardy.). So how much support from Airbus, which also opposed the Skymark/ANA deal after ANA turned down the canceled A380s (Airbus and Intrepid to reject ANA/Skymark tie-up.), Intrepid's plan would be able to gain remains questionable. At the August 5th creditors' meeting, a proposal is required to win approval of a majority of debt holders, both in terms of the proportion of liabilities and the number of creditors. With Intrepid and Airbus's claims together accounting for over 60% of the liabilities, the European planemaker's decision is crucial. "We will study both plans. We hope one of them, if not two, will be viable for Skymark," said Fabrice Brégier, CEO of Airbus.
The supervisory board selected by the court said both proposals were realistic, commenting "It can't be said that Skymark wouldn't be able to carry out its rehabilitation without an airline sponsor," adding "Skymark had originally sought for a revitalization process without a sponsoring airline. Also, it can't be said that another sponsor (other than ANA) could not be found in the future." Skymark and ANA will hold an emergency meeting in early July to persuade creditors to endorse their proposal on August 5th, while Intrepid will continue to talk with airlines in search of a sponsor (and taker of the A330s). For most of the flying public, Intrepid's proposal would be welcome as it confirms Skymark's future as the third force independent from ANA or JAL, ensuring competition remains at Haneda. Stay tuned.
Source: Nikkei Shimbun, June 17th. (in Japanese)
Source: Yomiuri Shimbun, June 17th. (in Japanese)
Source: Reuters Japan, June 19th. (in Japanese)
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| Boeing 737-82Y(WL) JA73NE comes in to land at New Chitose near Sapporo. Japan's third largest carrier controls 36 coveted slots-pairs at preferred Haneda. (Photo: Ryosuke Yano) |
Under the Skymark/ANA scheme, a total of 18 billion JPY would be injected into the bankrupt airline by Integral Corporation, UDS Airlines Investment, and ANA Holdings, which would in turn control 50.1%, 33.4%, and 16.5%, respectively. Six executives would sit on the board; Integral would select three, ANA two, and UDS one, while Integral would appoint the Chairman and UDS the President. The proposal would likely include reducing Skymark's network and fleet, implementing code-sharing, joint ticket sales, joint fuel purchases, and joint crew training with ANA, and gradually aligning its network to complement that of ANA's. This would virtually transform Skymark into another zombie feeder carrier, replicating how ANA controls AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ]. Debt repayment rate to those who claim over 1 million JPY is set at 5%.
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| Boeing 767-381 JA8569 arrives at Haneda. Adding Skymark to ANA's portfolio of zombie carriers Air Do, Solaseed Air, and Star Flyer would have them control a dominant 60% of domestic slots at Haneda. With the remaining 40% controlled by JAL, it effectively brings back duopoly to Japan's most important airport. (Photo: Ryosuke Yano) |
Meanwhile, Intrepid's deal includes the same 18 billion JPY, however, the plan has been amended to have Integral as the sole provider of the injection. This effectively paves the way for non-investment sponsorship by foreign airlines, which could be more acceptable to the regulators who are still uncomfortable about allowing foreign investment in Japanese carriers at slot-restricted Tokyo/Haneda [HND/RJTT]. Skymark's biggest creditor is seeking 900 million USD (104 billion JPY) for scrapping seven Airbus A330 contracts (Skymark terminates all Airbus A330 leases.), and though it favored ANA sponsorship when Japan's largest airline said it could induct the A330s, it decided to submit its own proposal when it learned ANA would not take them. Debt repayment rate for those claiming over 1 million JPY has been increased from 3% to 5% or higher, matching that of the Skymark/ANA plan.
Intrepid is reportedly holding talks with a number of candidate sponsors, who would be willing to take up the grounded A330s. Rumors point to Delta Air Lines [DL/DAL] and Hainan Airlines [HU/CHH], and at least the former's President Ed Bastian confirmed they had been approached though declining to give any details. The Skyteam member has long wanted a partner in Japan, and fought hard and failed to lure then-bankrupt Japan Airlines [JL/JAL] from American Airlines [AA/AAL] and Oneworld back in 2010. However, times have changed and so may have Delta's priorities; Japan is a shrinking market and U.S. airlines are focusing more on China, and Delta is reportedly negotiating a deeper cooperation, if not a joint-venture (JV), with Skyteam partner Korean Air [KE/KAL]. Delta also recently decided to forfeit its Seattle-Tacoma [SEA/KSEA] slot-pair at Haneda, leaving only Los Angeles [LAX/KLAX].
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| Boeing 777-232/ER N862DA at Narita. Delta's Tokyo presence it inherited from the Northwest merger continues to shrink; other than U.S. cities, only five intra-Asian/Pacific routes are expected to remain by 2016. Pursuing China through a potential deeper cooperation with Korean Air seems to be their priority. (Photo: Ryosuke Yano) |
In addition, though Delta may take the Rolls-Royce-powered A330s (their current A330s are Pratt & Whitney and General Electric), they have no interest in A380s (Skymark's Airbus A380 order in jeopardy.). So how much support from Airbus, which also opposed the Skymark/ANA deal after ANA turned down the canceled A380s (Airbus and Intrepid to reject ANA/Skymark tie-up.), Intrepid's plan would be able to gain remains questionable. At the August 5th creditors' meeting, a proposal is required to win approval of a majority of debt holders, both in terms of the proportion of liabilities and the number of creditors. With Intrepid and Airbus's claims together accounting for over 60% of the liabilities, the European planemaker's decision is crucial. "We will study both plans. We hope one of them, if not two, will be viable for Skymark," said Fabrice Brégier, CEO of Airbus.
The supervisory board selected by the court said both proposals were realistic, commenting "It can't be said that Skymark wouldn't be able to carry out its rehabilitation without an airline sponsor," adding "Skymark had originally sought for a revitalization process without a sponsoring airline. Also, it can't be said that another sponsor (other than ANA) could not be found in the future." Skymark and ANA will hold an emergency meeting in early July to persuade creditors to endorse their proposal on August 5th, while Intrepid will continue to talk with airlines in search of a sponsor (and taker of the A330s). For most of the flying public, Intrepid's proposal would be welcome as it confirms Skymark's future as the third force independent from ANA or JAL, ensuring competition remains at Haneda. Stay tuned.
Source: Nikkei Shimbun, June 17th. (in Japanese)
Source: Yomiuri Shimbun, June 17th. (in Japanese)
Source: Reuters Japan, June 19th. (in Japanese)
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