Monday, March 2, 2015

Skymark decides to close Yonago, keep Ibaraki.

Skymark Airlines [BC/SKY] confirmed that its Yonago [YGJ/RJOH] focus city would be closed down after operating its last flights on August 31st. The bankrupt carrier (Skymark to file for bankruptcy.) notified the Japan Civil Aviation Bureau (JCAB) on February 27th that they would suspend its single daily services to Kobe [UKB/RJBE] and Okinawa/Naha [OKA/ROAH], its last two remaining destinations from the airport in Tottori prefecture.

Boeing 737-8HX JA737P is being prepared for its next flight at Ibaraki. Being the sole domestic carrier at the airport, Skymark has confirmed it will stay. Ibaraki is Japan's first LCC-tailored airport, boasting operating fees 40% lower than the other two main airports serving the Greater Tokyo region. (Photo: Ryosuke Yano)

Yonago was a new destination only launched on December 20th, 2013 as a focus city, boasting five routes covering Kobe, Naha, Sapporo/New Chitose [CTS/RJCC], Tokyo/Haneda [HND/RJTT], and Tokyo/Narita [NRT/RJAA] at peak time last summer. However, as Skymark's financial situation quickly deteriorated (Skymark braces for 13.7 billion JPY loss in FY2014.), New Chitose along with both airports serving Tokyo were axed effective October 27th, 2014. Load factor for January was 42.9% for Yonago – Kobe and 39.3% for Yonago – Naha.

Japan's third largest carrier is also considering closing down its Sendai [SDJ/RJSS] focus city as well (Skymark mulls Yonago pull-out and Sendai cuts.). All flights to Fukuoka [FUK/RJFF] and New Chitose will be dropped effective March 30th, after it reduced flights on February 1st (Skymark to cut 15% of flights, ground all Airbus A330s.), relegating it to a spoke city. Kobe will remain the only destination, but load factors for that route have also hovered around 30-40%, so an entire withdrawal is probably only a matter of time.

Meanwhile, they confirmed that it would keep flying from Ibaraki [IBR/RJAH], citing low operating costs. "We will continue to use it as one our main focus cities; we may even add more flights," said Representative Chairman Takashi Ide. Skymark is the only domestic carrier serving the airport originally designed with LCCs in mind. It is also the third airport in the Kanto (Greater Tokyo) region after Haneda and Narita, mainly catering to those living in the north and northeast of Japan's largest metropolitan area.

The cash-strapped airline is currently running on financial aid provided by investment fund Integral Corporation, and they together are in the process of selecting an airline sponsor as well as a few non-airline partners. AirAsia [AK/AXM] and ANA Holdings, parent of All Nippon Airways [NH/ANA], are the only two airline firms that have submitted comprehensive proposals (ANA and AirAsia bid to save Skymark.), however, Integral's Director Nobuo Sayama recently interestingly said "We will examine all proposals, but we don't necessarily need to make a selection," adding "We may choose to do it 100% ourselves."

Skymark's shares were de-listed on March 1st, and it will perform a 100% capital reduction, turning all stocks into scrap pieces of paper. Former President and CEO Shinichi Nishikubo, who owned 30% of Skymark when he was at helm, had decreased its shareholding to 9.78% by February 6th, and that figure was down to zero by February 19th.

Source: Nikkei Shimbun, February 26th. (in Japanese)
Source: Skymark Airlines, February 27th. (in Japanese)
Source: NHK, February 27th. (in Japanese)
Source: Mainichi Shimbun, February 28th. (in Japanese)
Source: Nihonkai Shimbun, February 28th. (in Japanese)

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