Tuesday, May 26, 2015

Airbus and Intrepid to reject ANA/Skymark tie-up.

Skymark Airlines' [BC/SKY] biggest creditors Intrepid Aviation and Airbus have informed the bankrupt carrier (Skymark to file for bankruptcy.) that they would block a corporation rehabilitation plan involving All Nippon Airways [NH/ANA]. Creditors have filed claims totaling 320 billion JPY (Skymark's total debts skyrocket to 300 billion JPY.), with the U.S.-based leasing firm seeking 900 million USD (104 billion JPY) for scrapping seven A330 contracts (Skymark terminates all Airbus A330 leases.) and the European planemaker demanding 700 million USD (85 billion JPY) for the canceled Airbus A380 order (Skymark's Airbus A380 order in jeopardy.).

Boeing 737-86N(WL) JA73NX lands at Haneda near sunset. Its fleet of 27 baby Boeings is also expected to be reduced. (Photo: Ryosuke Yano)

Both Airbus and Intrepid had earlier welcomed the tie-up after ANA reportedly told them it would consider taking up the A380s and A330s in concern, but the latest scheme does not include any use of the displaced airframes by ANA nor Skymark. The plan, which needs to be submitted to the Tokyo District Court by May 29th, 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 deal.

On April 22nd, Skymark, Integral Corporation, and ANA Holdings had signed a Memorandum of Understanding (MoU) where the investment fund would take a 50.1% control while Japan's largest carrier would virtually control 49.9% together with its partner banks (Skymark gives in to ANA; Japan reverts to duopoly.). The latest plan calls for ANA to hold 16.5% while Development Bank of Japan and Sumitomo Mitsui Banking would together hold 33.4%; Skymark's 36 lucrative slots-pairs at Haneda would need to be relinquished if ANA's shareholding exceeds 20%, as required by the regulator. The initial corporation rehabilitation 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?).

Skymark is boldly setting its debt repayment ratio target at around 5%, asking its creditors to write off the remainder. The embattled airline does not have enough time to reach a deal with creditors by May 29th, and negotiations are likely to continue until July. Meanwhile, either Nobuo Sayama or Reijiro Yamamoto, the two Presidents of Integral Corporation, is expected to be appointed Skymark's Chairman, representing the airline. ANA was looking for a veteran to install in Skymark as President, but the Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) is reportedly opposing it to keep Skymark as independent as possible, and that position is now likely to come from Development Bank of Japan.

ANA and Integral's agreement is still fragile with looming distrust and conflicting interests; ANA wants to place Skymark under its influence once and for all and keep genuine domestic competition out of bread-and-butter Haneda for as long as possible, while Integral wants to rebuild Skymark as a fully independent carrier. And now, either ANA (or Skymark) is forced to take up the A380s and A330s or pay the hefty compensation, and in the worst case scenario at least for ANA, Skymark would need to find another partner (ANA and AirAsia bid to save Skymark.). But for Skymark too, it is questionable if they have enough financial strength and support to withstand the time and work needed to propose another plan with a new partner from scratch.

Source: Nikkei Shimbun, May 19th. (in Japanese)
Source: Mainichi Shimbun, May 26th. (in Japanese)
Source: Yomiuri Shimbun, May 26th. (in Japanese)
Source: Nikkei Shimbun, May 26th. (in Japanese)
Source: Nikkei Shimbun, May 27th. (in Japanese) 
Source: Yomiuri Shimbun, May 27th. (in Japanese)

*Edited/updated on May 27th, 2015.

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