Wednesday, March 18, 2015

Skymark terminates all Airbus A330 leases.

Skymark Airlines [BC/SKY] has apparently decided to permanently dispose of their Airbus A330s, the entire fleet of which was grounded (Skymark Airbus A330 operates last revenue flight.) effective February 1st, only three days after filing for bankruptcy protection (Skymark to file for bankruptcy.). According to the Yomiuri Shimbun, lease contracts for all 10 A330s ordered were terminated by March 13th. A total of seven were to be leased from Intrepid Aviation, of which four had been delivered, and three from CIT Aerospace, of which one had been delivered.

Airbus A330-343E JA330A taxies at Haneda in November 2014. All five A330s that have been delivered to Japan remain parked at Tokyo's downtown airport. Its all-premium layout without any in-flight entertainment has made it difficult to find new operators, but costs for reconfiguring would probably be included in the compensation the two lessors would be seeking. (Photo: Ryosuke Yano)

Japan's embattled third largest carrier only took delivery of their first pair of A330s a year ago on February 28th, 2014 (Skymark Airlines' first two Airbus A330s delivered.). Powered by two Rolls-Royce Trent 772B-60 engines, the European wide-bodied twin-jets boasted a generous seven-abreast (2-3-2) 271-seat all-premium layout. After delaying service entry four times or by almost three months (Skymark delays Airbus A330 launch again; now June 14th.) due to certification issues, it finally inaugurated service on June 14th (Skymark Airlines inaugurates Airbus A330 service.).

However, as Skymark dumped capacity on trunk routes from Tokyo/Haneda [HND/RJTT], they often had to keep the price of the A330s' premium seats to below that of even rivals' economy fares to fill the new airplanes; the more they flew the A330, the more they hemorrhaged. So effective February 1st, the fleet was standardized on the 177-seat all-economy Boeing 737-800s once again. Thanks to the A330 grounding as well as several frequency cuts (Skymark to cut 15% of flights, ground all Airbus A330s.), Skymark's system-wide load factor for February was 68.6%, up from 55.1% in January.

The bankrupt airline is currently running on financial aid provided by investment fund Integral Corporation, and they together are in the process of choosing an airline sponsor as well as two or three 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.). Concerning the A330, the Malaysia-based LCC group had suggested reconfiguring the A330 in a high-density layout and placing them on a different operating certificate for international routes, while ANA's plan had called for disposal.

Skymark estimated its total liabilities at 71 billion JPY, not including the 700 million USD in penalties Airbus is seeking for the cancellation of the A380 order (Skymark hopes to settle Airbus A380 penalty in October.). The premature termination of the A330 lease contract will likely have lessors Intrepid Aviation and CIT Aerospace seek compensation as well. All creditors have until March 18th to submit the figure Skymark owes to each of them, and the cash-strapped airline will probably make its final selection of sponsors only after that.

Source: Yomiuri Shimbun, March 10th. (in Japanese)
Source: Yomiuri Shimbun, March 15th. (in Japanese)

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