Vanilla Air eyes China, Southeast Asia, and Okinawa hub.

On January 29th, Vanilla Air's [JW/VNL] owner ANA Holdings, parent of Japan's largest carrier All Nippon Airways [NH/ANA], announced that it would increase the Tokyo/Narita [NRT/RJAA]-based LCC's capacity by 218% as measured by available seat kilometers (ASKs) by the end of FY2020. It aims to become the number one LCC at Narita, going head to head with rival Jetstar Japan [GK/JJP], and also partly competing with sister Peach Aviation [MM/APJ], minority-owned by ANA.

Airbus A320-216(SL) JA06VA taxies for departure from Narita. Vanilla Air plans to add up to five aircraft in FY2016, with another dozen to be inducted by FY2020. (Photo: Ryosuke Yano)

Vanilla will add more leisure-oriented markets, including cities which have yet to be served by the ANA Group, and enter the Chinese market to tap into Japan's largest source of inbound tourists. It also envisions setting up its second hub at Okinawa/Naha [OKA/ROAH], and designating Taipei/Taoyuan [TPE/RCTP] a strategic focus city, which would inevitably increase overlap with Peach (Peach Aviation grows Okinawa; Narita and more Taipei.). Guam, Saipan, Philippines, along with Southeast Asia are on the horizon, though Osaka/Kansai [KIX/RJBB] – Taipei (Vanilla Air to add Kansai – Taipei in Summer 2016.) is expected to become the next route.

Its current fleet of eight 180-seat Airbus A320s will be grown to 25 by FY2020, and the re-engined A320neo is under consideration. Acquisition of A330 wide-body aircraft will also continue to be evaluated, but it would be necessary if Vanilla wishes to fly to Southeast Asia nonstop from Narita both ways without payload penalties. "A single-type operation is the LCC formula, but we're also evaluating a plan with wide-bodies," said ANA Holdings President Shinya Katanozaka, adding "Asian LCCs are evolving, and they're entering longer routes. We may operate two types side-by-side, or even a complete shift to wide-body-only operations in the long-term is also a possibility."

Some sources say there is already an undisclosed done deal for ANA to lease a few A330s from CIT Aerospace for deployment at Vanilla. Pleasing CIT, Skymark Airlines' [BC/SKY] fourth largest creditor after Intrepid Aviation, Airbus, and Rolls-Royce, was also necessary for ANA to win support to sponsor Japan's bankrupt third largest airline (Bye-bye Skymark, Hello ANA Airbus A380?). Meanwhile, Vanilla has become quiet on any plans to fly to Hawaii after ANA finally released plans to fly Skymark's displaced A380s to the popular resort destination. With ANA's A380s planned to accommodate 500 to 600 passengers, they would virtually be dumping seats in the market overnight, and an entry by Vanilla would result in excessive overcapacity.

Source: ANA Holdings, 2016 January 29th. (in Japanese)
Source: Aviation Wire, 2016 February 3rd. (in Japanese)

*Edited/updated on 2016 February 3rd. 

ANA launches Narita – Houston.

On June 12th, All Nippon Airways [NH/ANA] launched daily Tokyo/Narita [NRT/RJAA] – Houston/George Bush [IAH/KIAH] service (ANA announces Houston and Southeast Asia expansion.) using 250-seat (eight first, 52 business, 24 premium economy, and 166 economy) Boeing 777-300ERs. Operated as part of the joint-venture (JV) with Star Alliance partner United Airlines [UA/UAL], this is the first direct link from Japan to the Texas airport on a Japanese carrier.

Boeing 777-381/ER JA733A departs rainy Narita on ANA's inaugural to Houston. (Photo: Aviation Wire)

Inaugural flight NH174 departed Narita at 1115 JST with a load of 244 passengers, 14 flight attendants, and three cockpit crew. Flown by 777-381/ER JA733A, it lifted off from Runway 34L at 1146.

Flight Schedule:
Narita – Houston/George Bush NEW 1 daily with B777-300ER.
NH174 NRT 1115 – 0930 IAH 77W Daily
NH175 IAH 1120 – 1520(+1) NRT 77W Daily

Houston is the fourth most populous city in the U.S. housing several energy corporations. The new service will augment United's existing daily flight, and is aimed at enhancing connection to and from Latin America, especially Mexico, where the presence of Japanese companies is rapidly increasing. At Narita, passengers can connect from Bangkok/Suvarnabhumi [BKK/VTBS], Ho Chi Minh/Tan Son Nhat [SGN/VVTS], Mumbai/Chhatrapati Shivaji [BOM/VABB], Singapore/Changi [SIN/WSSS], and Yangon [RGN/VYYY] onto the new service, while at Houston, ANA has placed its code on 19 U.S. domestic and seven Mexico routes operated by United.

Present at the departure of their first flight, Shinya Katanozaka, President of ANA Holdings, parent of ANA, said "We expect strong demand from energy-related businesses, but we would like to develop the leisure travel market as well. Already 25% of today's flight are connecting passengers, and that would probably go up to 50%," adding "Our target load factor is 75%. The figures so far look better than our other recently-started routes. We put the 777-300ER because it is equipped with first class, and there's strong demand for corporate travel."

Source: Aviation Wire, June 12th. (in Japanese)

Skymark and Intrepid submit rivaling revival plans.

On May 29th, Skymark Airlines [BC/SKY] filed a corporation rehabilitation plan with the Tokyo District Court that includes a sponsorship agreement with ANA Holdings, parent of All Nippon Airways [NH/ANA]. The new owners would together inject 18 billion JPY into the bankrupt carrier (Skymark to file for bankruptcy.), and a debt-equity swap would leave Integral Corporation holding 50.1%, UDS Airlines Investment 33.4%, and ANA Holdings 16.5%. UDS is a new investment firm jointly owned by Development Bank of Japan and Sumitomo Mitsui Banking. Six executives will sit on the board, and Integral will select three, ANA two, and UDS one; Integral will appoint the Chairman while UDS will choose the President.

Boeing 737-86N(WL) JA73NK rotates from Haneda. If the ANA partnership is approved, Skymark will likely use some of its 36 slots to take over or launch less profitable routes for ANA, as is the case with Air Do, Solaseed Air, and Star Flyer. (Photo: Ryosuke Yano)

The proposal includes allocating all 18 billion JPY to repay its debt, which Skymark targets to reduce to just 5% for creditors who claim over 1 million JPY. Creditors have so far filed claims totaling 308.9 billion JPY (Skymark's total debts skyrocket to 300 billion JPY.), including aircraft lessor Intrepid Aviation seeking 900 million USD (104 billion JPY) for scrapping seven Airbus A330 contracts (Skymark terminates all Airbus A330 leases.) and Airbus demanding 700 million USD (85 billion JPY) for the canceled A380 order (Skymark's Airbus A380 order in jeopardy.). The ANA/Skymark plan is expected to include code-sharing, joint ticket sales, joint fuel purchases, and joint crew training with ANA. A new corporate identity is also likely (Skymark hints at new brand: SKY bee?).

Meanwhile, biggest creditor Intrepid, which has decided to oppose ANA involvement in the rehabilitation proceedings (Airbus and Intrepid to reject ANA/Skymark tie-up.), also submitted a rivaling plan on May 29th. It says Integral would be the primary sponsor, but it would select an alternative airline partner other than ANA. "We are currently in the process of identifying candidates for a new airline sponsor," said the U.S.-based leasing firm, revealing Delta Air Lines [DL/DAL] as one of them (Skymark's fate: AirAsia, ANA, Delta, or...?). The debt repayment rate for those claiming over 1 million JPY is set at 3%, which is lower than the ANA/Skymark proposal. The European planemaker had also handed in a statement to the court on May 28th saying "If Skymark submits the plan (that involves ANA's sponsorship), there is a significant and realistic risk that it would not be able to gain the support of major creditors, including Airbus."

Airbus A320-211 N341NW at Salt Lake City. Intrepid Aviation is reportedly asking Delta Air Lines to sponsor Skymark. Airbus may also support the scheme, as the SkyTeam carrier is a major customer with 25 A350-900s, 25 A330-900neo aircraft, nine more A330-300s, and 45 A321s on order with potential for more. Delta has long wanted a partner in Japan, but has so far refrained from assisting Skymark. (Photo: Ryosuke Yano)

Intrepid had initially welcomed ANA's involvement as Japan's largest carrier reportedly talked positively about inducting Skymark's A330s, however, after they learned Japan's largest carrier would not take them up, it changed its mind. "It is true that we discussed the possible use of Skymark's A330 with Intrepid. And some media are reporting as if we are breaking a promise, but we didn't have any binding agreement. We ourselves are confused by what Intrepid is saying," said Toyoyuki Nagamine, Senior Executive Officer of ANA. Airbus is also unsatisfied with ANA not taking up the A380s. "We're not going to acquire a new aircraft just because we became Skymark's sponsor. We believe we enjoy a long friendly relationship with Airbus, and that would continue in the future. We will assist Skymark in negotiations with them," responded Mr. Nagamine.

Skymark criticized Intrepid's plan, saying feasibility of the rival proposal "is not clear at all" and offers a lower repayment rate for creditors' claims. The bankrupt carrier expressed confidence that if the court approves both plans, a majority of creditors would give consent for the ANA/Skymark rehabilitation plan at their meeting currently planned for July. 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; thus rejection of the proposal by the two biggest creditors effectively blocks the ANA/Skymark tie-up. However, Skymark believes its actual debt they owe to Intrepid and Airbus are much lower, and hence do not need the support of the two (at least for now) biggest creditors.

Airbus A320-211 JA8947 taxies past a JAL Boeing 737. Adding Skymark to ANA's portfolio of puppet carriers Air Do, Solaseed Air, and Star Flyer would have them control a dominant 60% of domestic slots at Haneda. The JAL Group controls the remaining 40%, effectively bringing back duopoly at Japan's most important airport. (Photo: Ryosuke Yano)

ANA Holdings President Shinya Katanozaka said "We are the best sponsor." Although ANA and Intrepid have agreed to re-list Skymark within five years, the chief said "Our firm hold of Skymark shares will translate into their revitalization," adding "If there is a merit to both of us, we want to continue the partnership beyond their rehabilitation period." With so much priority on keeping genuine competition out of Tokyo/Haneda [HND/RJTT], ANA likely has no intention of letting go of its influence on the former rival start-up, which ultimately forced Japan's largest carrier to launch full-fledged LCCs Peach Aviation [MM/APJ] and the first AirAsia Japan (Mk I) [JW/WAJ] (CoachFlyer JW8541: NRT - FUK on AirAsia Japan's Airbus A320.), which now operates as Vanilla Air [JW/VNL].

Skymark plans to commence code-sharing with ANA as soon as it receives approval from regulator Japan Civil Aviation Bureau (JCAB), though routes have not been disclosed. Nobuo Sayama, President of Integral said, "We will suspend Sendai (Skymark to pull out of Sendai in October.) and Yonago (Skymark decides to close Yonago, keep Ibaraki.), but will fly elsewhere, where we can find more customers," adding "We will discuss new destinations with ANA as early as autumn." As with ANA's other minority-owned but de facto controlled carriers AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ], some of Skymark's Haneda slots are likely to be used to take over ANA's less profitable routes or launch new links on behalf of ANA, gradually transforming Skymark into a feeder carrier for Japan's biggest carrier.

ANA's Mr. Nagamine says Skymark would still be independent, as "Pricing would be decided by Skymark." Well, not many would agree with that.

Source: Aviation Wire, May 29th. (in Japanese)
Source: Aviation Wire, May 29th. (in Japanese)
Source: Reuters Japan, June 1st. (in Japanese)
Source: Nikkei Shimbun, June 2nd. (in Japanese)
Source: Yomiuri Shimbun, June 3rd. (in Japanese)
Source: Business Journal, June 3rd. (in Japanese)
Source: Nikkei Shimbun, June 5th. (in Japanese) 

*Edited/updated on June 5th, 2015.

Skymark hints at new brand: SKY bee?

Bankrupt Skymark Airlines [BC/SKY] (Skymark to file for bankruptcy.) confirmed that it will change its name and livery, and revamp their product along with staff uniforms. The re-branding could take place as early as late July, which is when their corporation rehabilitation plan would be implemented, provided it wins majority approval from creditors (Skymark's total debts skyrocket to 300 billion JPY.) at a meeting to be held in late June. The plan must be submitted to the Tokyo District Court, where it filed for bankruptcy protection, by May 29th.

Boeing 737-82Y(WL) JA737Z arrives at Ishigaki as flight BC567 from Naha on March 28th as Skymark's last flight to the southern Okinawa airport. Along with Miyako, it was dropped as part of their restructuring. (Photo: Aviation Wire)

"We want to think from zero," said Nobuo Sayama, President of Integral Corporation, in a weekend news program, revealing SKY bee is one of their top candidates for the new identity. Together with advertising agencies Sunny Side Up and TYO, the investment fund, which has pledged 9 billion JPY to keep the cash-strapped airline flying while it reorganizes (Skymark to cut 15% of flights, ground all Airbus A330s.), disclosed a logo that uses a hornet. On April 6th, Skymark's President Masakazu Arimori confirmed "We have come a long way, so we want to renew the airline. We can't tell if it will be SKY bee, but SKY will remain part of it."

Meanwhile, the selection of sponsors to help Skymark out of bankruptcy (Skymark seeks investor airline; scraps ANA & JAL dual tie-up.) is taking much longer than expected. "If there is an airline who is sincerely willing to help rebuild Skymark, we would like to work with them," said Mr. Sayama, implying their view of both bidders AirAsia [AK/AXM] and ANA Holdings, parent of All Nippon Airways [NH/ANA] (ANA and AirAsia bid to save Skymark.), as having no genuine interest in Skymark except for the lucrative 36 slot-pairs Japan's third largest carrier controls at Tokyo/Haneda [HND/RJTT]. "If our employees don't feel comfortable about the sponsor, we won't get along," reiterating that Integral is prepared to become its sole sponsor, taking full control of Skymark's rehabilitation.

On March 30th, ANA Holdings' new President Shinya Katanozaka said "We can't let a competitor slip away with the slots," adding "That would be detrimental to our business." So that Skymark wouldn't need to relinquish its precious slots, ANA would keep its investment under 20%, but "Partnering without shareholding is out of question," said Mr. Katanozaka, adding "We need to be at the center of their restructuring." The Ministry of Land, Infrastructure, Transport, and Tourism (MLIT), which regulates Haneda, has notified they would limit any ANA investment to five years, in an effort to keep Skymark as Japan's third force, but ANA's chief opposes "It took over a decade to get rid of AIRDO's [HD/ADO] (d.b.a. Air Do) and Skynet Asia Airways' [6J/SNJ] (d.b.a. Solaseed Air) debts, so in that event we will urge MLIT to lift that."

AirAsia Group's CEO Tony Fernandes is also expected to visit Tokyo soon to pitch his proposal to the embattled airline. According to people close to the matter, the chief of Asia's largest LCC group will present details of a plan to help Skymark settle penalties charged by Airbus and aircraft lessors for the canceled A380s (Skymark's Airbus A380 order in jeopardy.) and A330s (Skymark terminates all Airbus A330 leases.) as well as cooperate on operations, and discuss a potential future investment. "Our plan guarantees Skymark's independence," said the source. Meanwhile, a Skymark spokesperson said "We haven't talked in detail, so at this point we can't say if AirAsia's plan is acceptable or not." Mr. Fernandes is also busy with AirAsia Japan (Mk II), which is currently preparing to launch operations from Nagoya/Chubu Centrair [NGO/RJGG] by the end of this year (New AirAsia Japan eyes launch by year-end 2015.).

However, with Skymark starting to tweak its product, including overhauling its brand, it may actually decide to go without any airline sponsors after all. Check-in baggage allowance has been increased from 15 to 20 kilograms, while stricter cosmetics and hairstyle rules for flight attendants have been implemented, which at least don't seem to go in the direction of a LCC. But opting not to name any airline sponsors is likely to have a negative effect on their negotiation power with creditors in reducing their huge debt (Skymark's total debts skyrocket to 300 billion JPY.). Stay tuned.

Source: Reuters Japan, March 31st. (in Japanese)
Source: Jiji Press, April 1st. (in Japanese)
Source: Mainichi Shimbun, April 4th. (in Japanese)
Source: Aviation Wire, April 6th. (in Japanese) 
Source: Nikkei Shimbun, April 7th. (in Japanese)

*Edited/updated on April 7th, 2015.