Monday, February 23, 2015

ANA and AirAsia bid to save Skymark.

Follow-up from Skymark likely to accept ANA sponsorship.

On February 23rd, ANA Holdings and AirAsia [AK/AXM] filed sponsorship proposals to assist bankrupt Skymark Airlines [BC/SKY] (Skymark to file for bankruptcy.). This day was the deadline set by Skymark's financial adviser GCA Savvian for airline firms willing to help Japan's troubled third largest carrier, while February 19th was the time limit for non-airline companies. Financial services groups Daiwa Securities, Orix, and Shinsei Bank, as well as travel agency H.I.S. and major trading firm Sojitz are some of nearly 20 non-airline names that submitted proposals.

Airbus A320-214 JA02AJ of AirAsia Japan (Mk I) taxies past ANA Wings' Boeing 737-54K JA306K at Fukuoka in August 2012. AirAsia and ANA, which had a short-lived marriage with the joint-venture, are now fighting for Skymark. (Photo: Ryosuke Yano)

The parent of Japan's largest carrier All Nippon Airways [NH/ANA] handed in a comprehensive restructuring plan (Running out of time: Will Skymark join ANA?) that includes an eventual minority interest under 20%, the maximum possible ownership change allowed if Skymark were to retain the lucrative 36 domestic slot-pairs at Tokyo/Haneda [HND/RJTT], which are at the center of the picture. The plan includes extensive code-sharing, joint ticket sales, joint fuel purchases, joint crew training, and aligning Skymark's network with that of ANA's.

Meanwhile, the proposal submitted by the Malaysia-based pan-Asian LCC group reportedly does not include a prospective shareholding (Is AirAsia considering a Skymark takeover?). AirAsia's plans call for setting up a joint-venture with Skymark to operate their now grounded Airbus A330s (Skymark Airbus A330 operates last revenue flight.) on medium-to-long-range international routes, after reconfiguring them in a high-density layout. It would also mediate negotiations with the European planemaker for the A380 cancellation penalty (Skymark hopes to settle Airbus A380 penalty in October.), taking advantage of AirAsia's status as the biggest A330 and A320 customer. 

Japan Airlines [JL/JAL] and Delta Air Lines [DL/DAL] did not apply. "We looked at the papers, and decided investing in Skymark is not what we should be doing now," said JAL President Yoshiharu Ueki on February 18th, while Delta's Senior Vice President of New York region Gail Grimmett also said "We have no plans to invest in Skymark." For JAL, itself saved from bankruptcy by a government bailout in 2010, the controversial 8.10 Paper prohibits them from making any new investments until FY2017. Chinese LCC Spring Airlines [9C/CQH] was approached by the cash-strapped airline, but apparently, they opted to keep their hands off.
Airbus A330-343E JA330B rolling for takeoff from Haneda on a training flight in April 2014. The aircraft is now grounded, but AirAsia's plans call for a joint-venture (AirAsia X Japan?) to fly them on international routes. (Photo: Ryosuke Yano)

Selecting AirAsia would help Skymark remain an independent third force with no affiliation with ANA nor JAL, which is crucial to keeping competition at Haneda and some domestic routes. Charismatic former CEO Shinichi Nishikubo had vehemently rejected ANA assistance, saying "Skymark's meaning of existence lies in that we are independent." A reincarnation of AirAsia Japan (Mk II) (AirAsia Japan is officially reborn; first flight June 2015.) is currently being set up at Nagoya/Chubu Centrair [NGO/RJGG] (AirAsia Japan selects Nagoya Chubu Centrair.), however, the LCC group has repeatedly expressed desire to access Haneda's domestic slots. Meanwhile, regulatory hurdles seem to have delayed the new unit's launch to fourth quarter 2015 at earliest (New AirAsia Japan's first Airbus A320 due in July.).

On the other hand, an ANA partnership would virtually relegate Skymark to merely a feeder carrier for the giant. All three other start-ups that were born after Japan's deregulation, namely AIRDO [HD/ADO] (d.b.a. Air Do), Skynet Asia Airways [6J/SNJ] (d.b.a. Solaseed Air), and Star Flyer [7G/SFJ], failed to make their business cases work and accepted ANA's minority stake in exchange for giving ANA managerial control and hence de facto control of their respective precious Haneda slots. ANA veterans replaced management (New Star Flyer President is from ANA.), code-sharing was implemented on their entire networks, and routes and schedules are now closely coordinated with ANA.

Skymark's current Representative Chairman Takashi Ide had previously said "We seriously thought we could hand over management to Tony (Fernandes)," preferring AirAsia or any overseas partner over ANA or JAL. But winds seem to have changed and Mr. Ide revealed last week that they are seeking for sponsorship from a Japanese major airline (Skymark likely to accept ANA sponsorship.), adding "Our brand was stuck in the middle (of full-service carriers and LCCs). There are lots of things we can learn from the major carriers, for example in service quality."

Skymark and partner investment fund Integral (Integral: Keeping Skymark the third force not priority.) will examine all proposals and likely select a single airline and a few non-airline firms as early as March. It needs to submit a corporation rehabilitation plan with the Tokyo District Court, where it filed for bankruptcy protection, by May 29th.

Source: Aviation Wire, February 18th. (in Japanese)
Source: Nikkei Shimbun, February 19th. (in Japanese)
Source: NHK, February 23rd. (in Japanese)
Source: Nikkei Shimbun, February 23rd. (in Japanese)

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