Skymark to add nonstop Ibaraki – Okinawa.

On January 21st, Skymark Airlines [BC/SKY] announced that it will add Ibaraki [IBR/RJAH] – Okinawa/Naha [OKA/ROAH] nonstop service effective April 28th. The new service will be operated daily using 177-seat Boeing 737-800s. This becomes the first new route launched by the bankrupt airline (Skymark to file for bankruptcy.) since a revamped management was installed by new owners ANA Holdings, parent of All Nippon Airways [NH/ANA], Integral Corporation, and UDS Airlines Invstment (Skymark relaunched with ANA sponsorship.).

Boeing 737-86N(WL) JA73NX at Narita. Skymark completely withdrew from Narita on October 25th, 2014 (Skymark announces Narita closure and Yonago cuts.) after losing the battle against LCCs. It currently operates 26 737s on 16 nonstop routes which mostly originate from its Haneda hub and focus cities at Kobe and Ibaraki. (Photo: Ryosuke Yano)

Japan's third largest airline currently offers a one-stop fly-through product between the two cities via Kobe [UKB/RJBE]. Making it nonstop cuts travel time from four to three hours and 15 minutes. It is not the first time Skymark has experimented with the route, having operated nonstop as a seasonal service in 2012 from July 1st to September 30th and again in 2013 from July 1st to October 26th. The last new route was Sapporo/New Chitose [CTS/RJCC] – Naha, which was inaugurated on January 29th, 2015, though it was suspended only two months later.

Flight Schedule:
Ibaraki – Naha NEW 1 daily with 737-800. (Apr/28-)
BC539 IBR 1900 – 2215 OKA 73H/738 Daily
BC530 OKA 0725 – 0955 IBR 73H/738 Daily

Skymark, which designates Ibaraki as a focus city, is the only domestic airline at the airport, flying to Fukuoka [FUK/RJFF], Kobe, and New Chitose, though operations have been downsized during restructuring (Skymark downsizes Ibaraki from September.). Ibaraki is dubbed the third airport serving the Kanto (Greater Tokyo) region, located 80 kilometers northeast of the capital, and the only LCC-friendly one in the region, boasting landing fees 30-40% lower than Tokyo/Narita [NRT/RJAA] and Tokyo/Haneda [HND/RJTT].

Once post-deregulation's most successful start-up to challenge the ANA/JAL duopoly, it is now controlled by Integral Corporation, which owns 50.1%, ANA Holdings, with 16.5%, and UDS Airlines Investment, having 33.4%. UDS is a new investment firm jointly owned by Development Bank of Japan (DBJ) and Sumitomo Mitsui Banking, both loyal partners of ANA. Code-sharing with ANA, which was planned for Winter 2016/2017, has now been further postponed, as Skymark continues to refuse to adopt ANA's Able-D reservation system. It would enable code-shares but would essentially relegate Skymark to a de facto puppet of ANA, joining the likes of AIRDO [HD/ADO] (d.b.a. Air Do), Solaseed Air [6J/SNJ], and Star Flyer [7G/SFJ]. Skymark strives to remain operationally independent until its planned re-listing in 2020, while ANA wants to keep it under its influence for as long as possible to shut out true competition at bread-and-butter Haneda.

Source: Skymark Airlines, 2016 January 21st. (in Japanese)
Source: Aviation Wire, 2016 January 21st. (in Japanese)
Source: Yomiuri Shimbun, 2016 January 24th. (in Japanese)

Skymark downsizes Ibaraki from September.

On March 4th, Skymark Airlines [BC/SKY] announced they would downsize their Ibaraki [IBR/RJAH] focus city, along with the closure of Yonago [YGJ/RJOH] (Skymark decides to close Yonago, keep Ibaraki.), effective September 1st. Frequency to both Fukuoka [FUK/RJFF] and Sapporo/New Chitose [CTS/RJCC] would be reduced to just one daily each, while the through-fare to Okinawa/Naha [OKA/ROAH] via Kobe [UKB/RJBE] would be scrapped.

Boeing 737-8FZ(WL) JA737U lands at Haneda in the late afternoon. Its fleet of 27 Boeing narrow-body jets will be reduced by one aircraft this year. (Photo: Ryosuke Yano)

The bankrupt carrier (Skymark to file for bankruptcy.) will also stop offering a through-fare from Tokyo/Haneda [HND/RJTT] to Nagasaki [NGS/RJFU] via Kobe, necessitating passengers to buy tickets for each leg separately. On the other hand, Nagoya/Chubu Centrair [NGO/RJGG] – New Chitose and Kobe – Naha would see a round-trip added, increasing frequency to three daily, respectively.

Flight Increases/Reductions effective September 1st:
Ibaraki – Fukuoka from 2 to 1 daily.
Ibaraki – New Chitose from 2 to 1 daily.
Kobe – Naha from 2 to 3 daily.
Chubu Centrair – New Chitose from 2 to 3 daily.
Yonago – Kobe to be suspended.
Yonago – Naha to be suspended.

The embattled 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.).

However, Representative Chairman Takashi Ide said "Our balance sheet looks much better after we standardized on Boeing 737s (Skymark Airbus A330 operates last revenue flight.)," adding "Which airline sponsor we select will depend on how much new value the partnership could bring, and not just increased revenue or cost cuts. We are talking with both parties for details." Mr. Ide also hinted it may opt to team up with only financial firms. The figure of Skymark's total liabilities would be calculated after March 18th, which is the deadline for creditors, including aircraft lessors as well as Airbus (Skymark's Airbus A380 order in jeopardy.), to report how much the airline owes them. Skymark would probably only make a decision after that.

Source: Asahi Shimbun, March 3rd. (in Japanese)
Source: Skymark Airlines, March 4th. (in Japanese)
Source: Nikkei Shimbun, March 4th. (in Japanese)
Source: Aviation Wire, March 4th. (in Japanese)

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)

Skymark to cut 15% of flights, ground all Airbus A330s.

Follow-up from Skymark to file for bankruptcy.

On January 29th, Skymark Airlines [BC/SKY] announced that its filing for bankruptcy protection (Skymark to file for bankruptcy.) with the Tokyo District Court had been accepted. During a press conference held by new President and CEO Masakazu Arimori and Representative Chairman Takashi Ide, it was announced that 15% of flights would be suspended and its entire Airbus A330 fleet grounded effective February 1st. Further network reductions will come into effect from March 29th, the beginning of the Summer 2015 timetable.

Skymark will move back to an all-Boeing 737 operator effective February 1st. The 271-seat all-premium Airbus A330s had only entered service on June 14th, 2014. (Photo: Aviation Wire)

Japan's third largest carrier currently flies 152 daily flights covering 23 nonstop routes, however, that will be reduced to 126 on Wednesdays and 128 on other days effective February 1st. A dozen routes spanning the following cities will be affected: Fukuoka [FUK/RJFF], Ibaraki [IBR/RJAH], Ishigaki [ISG/ROIG], Kobe [UKB/RJBE], Miyako [MMY/ROMY], Nagoya/Chubu Centrair [NGO/RJGG], Okinawa/Naha [OKA/ROAH], Sapporo/New Chitose [CTS/RJCC], Sendai [SDJ/RJSS], and Yonago [YGJ/RJOH].

Flight Reductions effective February 1st:
Fukuoka – Ibaraki from 2 daily to 1 daily. 
Fukuoka – Naha from 4 daily to 2 daily. 
Fukuoka – Sendai from 2 daily to 6 weekly. *Suspension from Mar/29.
Kobe – Naha from 2 daily to 1 daily. 
Kobe – New Chitose from 2 daily to 1 daily. 
Kobe – Yonago from 2 daily to 1 daily.
Chubu Centrair – Naha from 2 daily to 1 daily. 
Chubu Centrair – New Chitose from 2 daily to 1 daily.
Naha – Ishigaki from 3 daily to 2 daily. *Suspension from Mar/29.
Naha – Miyako from 3 daily to 2 daily. *Suspension from Mar/29.
New Chitose – Ibaraki from 2 daily to 1 daily.
New Chitose – Sendai from 3 daily to 2 daily. *Suspension from Mar/29.

From March 29th, in addition to the previously announced suspension of New Chitose – Sendai (Skymark takes ANA & JAL dual tie-up, axes Sendai – Sapporo.), Skymark will also axe Fukuoka – Sendai, plus Ishigaki and Miyako entirely. Further terminations are likely as the airline reorganizes, with Kobe – Kagoshima [KOJ/RJFK], Kobe – Sendai, and Yonago – Naha probably next up; these three along with New Chitose – Sendai recorded load factors in the 30-40% range for December, one of the peak travel months. Yonago, only launched on December 20th, 2013 as a focus city boasting five routes last summer, as well as Sendai are likely to be closed down entirely (Skymark mulls Yonago pull-out and Sendai cuts.).

As for its fleet, the all-premium 271-seat A330-300s (Skymark Airlines inaugurates Airbus A330 service.) they had only introduced in June last year will be grounded effective February 1st. Six have been delivered so far, though the sixth was only recently handed over and was awaiting a ferry flight from France. Five are leased from Intrepid Aviation and one from CIT Aerospace, with four more on order for delivery by September this year, but Skymark will negotiate to return all airframes and cancel the remaining on order. As it dumped capacity on trunk routes, Skymark often had to slash price of the A330s' premium seats to below that of rivals' economy fares; the more Skymark flew the A330, the more they hemorrhaged. Pilots certified for the A330 will be retrained for the Boeing 737.

Total debt stood at 71 billion JPY, not including the 700 million USD in penalties Airbus is seeking for the cancellation of the Airbus A380 order (Skymark hopes to settle Airbus A380 penalty in October.). As it also needs to cancel A330 contracts, the figure is only estimated to grow in the following months.

Investment fund Integral Corporation will provide finance and help Skymark continue flying while it reorganizes, and Mr. Arimori added "No specific airline has shown interest yet, but we will continue to look for sponsors according to law." Prospect for foreign investment is not zero, but ownership change exceeding 20% will necessitate relinquishing Skymark's 36 prized slot-pairs at Tokyo/Haneda [HND/RJTT], which decreases the appetite of airlines abroad (Skymark's fate: MLIT discourages foreign investment.). Domestically, ANA Holdings, parent of All Nippon Airways [NH/ANA], is the only airline in a position to assist, as the controversial 8.10 Paper prohibits Japan Airlines [JL/JAL] from making any new investments until FY2017.

Skymark also said it will continue discussions with both ANA and JAL to reach a code-share deal (Skymark takes ANA & JAL dual tie-up, axes Sendai – Sapporo.), however, the plan is likely to be reviewed as it was aimed to fill the excess capacity of the A330s. Layoff of staff is not planned, and its approximately 2,200 workforce will be retained at least for now.

The quarterly earnings report, which was due today, has been postponed to February 4th. Shares of Japan's troubled third largest carrier plunged 25% today on January 29th, down by 80 JPY, the maximum possible drop in a day, to 237 JPY per share. The carrier will be de-listed from the Tokyo Stock Exchange effective March 1st, so shareholders have until February 27th to manage their stocks.

But again, the biggest question is how will they restructure? Which market will they go after? Skymark will revert to an all-737 operator flying a network that is a fraction the size of ANA and JAL, without any loyalty program nor premium product. Fares will still be more affordable than ANA and JAL, but will be far from matching those of LCCs based at Tokyo/Narita [NRT/RJAA], its access of which has improved greatly both in terms of time and cost. As has been the case with its post-deregulation peers, will it eventually choose to come under the umbrella of ANA (Running out of time: Will Skymark join ANA?)? Or will it become Japan's first airline to be liquidated?

Source: Skymark Airlines, January 29th. (in Japanese)
Source: Skymark Airlines, January 29th. (in Japanese) 
Source: Nikkei Shimbun, January 29th. (in Japanese)
Source: Aviation Wire, January 29th. (in Japanese)
Source: Skymark Airlines, January 29th. (in Japanese) 

*Edited/updated on February 12th.

Skymark announces Narita closure and Yonago cuts.

On August 14th, Skymark Airlines (BC/SKY) announced the first step of realigning their business. The proposed Winter 2014/2015 schedule effective October 26th through December 25th will see the number of direct links cut by six, including a complete withdrawal from Tokyo/Narita (NRT/RJAA) and cuts at Yonago (YGJ/RJOH) (Skymark mulls pull-out from Narita and Yonago.), reducing the total number of routes to 23.

Boeing 737-8HX JA737N at Tokyo's Haneda. It will be returned to lessor ACG in May 2015. All three remaining non-winglet 737s will be withdrawn from service by October 2015, reducing the 737 fleet to 27. (Photo: Ryosuke Yano)

Affected routes from Narita are Okinawa/Naha (OKA/ROAH), Sapporo/New Chitose (CTS/RJCC), and Yonago, while New Chitose and Tokyo/Haneda (HND/RJTT) will be cut from their Yonago focus city. Ibaraki (IBR/RJAH) – Nagoya/Chubu Centrair (NGO/RJGG), which has been seeing the lowest load factor in their network, is also being axed. The two slot-pairs at Haneda will be allocated to Fukuoka (FUK/RJFF) and Kobe (UKB/RJBE), with each receiving one.

Frequency Increases:
Fukuoka – Naha from 3 to 4 daily.
Haneda – Fukuoka from 10 to 11 daily. Airbus A330 operating on 10 round-trips.
Haneda – Kobe from 6 to 7 daily.

Suspensions:
Ibaraki – Chubu Centrair 1 daily.
Narita – Naha 2 daily.
Narita – New Chitose 2 daily. 
Narita – Yonago 2 daily.
Yonago – New Chitose 1 daily.
Yonago – Haneda 2 daily.

Load factors from Narita weren't bad, hovering around 65-70%, however, low-season rates dropped to 50-60% last year, and with the Naha and New Chitose routes directly competing with LCCs Jetstar Japan (GK/JJP) and Vanilla Air (JW/VNL), Skymark has had to keep prices down to remain in the race. The Yonago link, though without a competitor, has never been popular. Their shelving of long-haul Airbus A380 plans from Narita (Skymark's Airbus A380 order in jeopardy.) also made domestic operations there, originally aimed at feeding the A380s, redundant. Skymark first landed at Narita on October 30th, 2011.

Yonago, the newest focus city for Japan's third largest airline which was only launched last December, has been observing low load factors around 30-40% for all routes except for Haneda (Skymark commences Sendai – Okinawa.). New Chitose and Haneda have been axed, however, a one-stop through-fare will be offered via their second biggest hub at Kobe. The Yonago – Haneda route sees heavy competition from All Nippon Airways (NH/ANA), which flies five round-trips and slashed fares predatorily to match Skymark after their entry. 

The Ibaraki – Chubu Centrair route, which was only started on April 18th (Skymark adds Fukuoka and Nagoya from Ibaraki.), has seen load factors treading around 10-20% ever since launch. Ibaraki, Japan's first and so far only LCC-dedicated airport, will still have non-stop flights to Fukuoka, Kobe, and New Chitose.

Airbus is said to be seeking around 70 billion JPY in penalties for the A380 cancellation, in addition to already-paid deposits amounting to 26.5 billion JPY, which is unlikely to be refunded. The figure is only expected to grow, as Rolls-Royce and interior makers also prepare to seek compensation from Skymark. On the other hand, the airline posted a full-year loss for the first time in five years for FY2013, announcing a 1.8 billion JPY loss. It lost another 5.7 billion JPY only in the first quarter of FY2014, prompting its accountants to report "doubts about its ability to continue as a going concern." Their cash and near-term assets stood at 7.2 billion JPY as of June, and they are desperate for financial support, something they have never asked for in their history.

Skymark's latest strategy tweak also includes a revamp of their fare system, offering prices that vary depending on availability, from October 26th onwards. Fares have also been raised. Its resource deployment will concentrate on its lucrative Haneda slots; increase frequency on trunk routes and bring up utilization of its A330s. However, this doesn't promise good returns; remember Star Flyer? Dumping Haneda slots into trunk routes led to increased passenger volume, but lower load factors and lower yields (Star Flyer to add Yamaguchi-Ube; but reduce Fukuoka.). I certainly hope they survive; ANA and JAL have no mercy in slashing fares when Skymark enters, but also notorious for bringing fares back up high in markets Skymark has exited.

Reference: Aviation Wire, August 14th. (in Japanese)

*Post edited/updated on August 19th.

Skymark commences Sendai – Okinawa.

On August 9th, Skymark Airlines (BC/SKY) launched seasonal service between Sendai (SDJ/RJSS) and Okinawa/Naha (OKA/ROAH). The route will be operated once daily with 177-seat Boeing 737-800s through September 15th.

Boeing 737-82Y(WL) JA73NE taxies past its fellow 737s as it arrives at Haneda. (Photo: Ryosuke Yano)

Flight Schedule (Aug/1 - Sep/15):
Sendai – Naha NEW 1 daily with 737-800.
BC583 SDJ 0910 – 1205 OKA 73H/738 Daily
BC586 OKA 1820 – 2100 SDJ 73H/738 Daily

In other news, Japan's third largest carrier released their July load factors. The figure was 74.4% system-wide, up 2.8% compared to the same period last year; number of available seats rose 6.7% to 920,949, while passengers carried increased 9.7% to 666,834. Their 36 slot-pairs at Tokyo/Haneda (HND/RJTT) continue to post high figures with all above 70%; the six routes from the preferred airport serving the capital generate roughly 80% of their revenue. Sendai is getting there, with numbers exceeding 60%, along with routes from Naha to Ishigaki (ISG/ROIG) and Miyako (MMY/ROMY), both of which posted over 70%.

Meanwhile, load factors from their new focus city at Yonago (YGJ/RJOH) continue to tread around 30-40%, excluding the double-daily Haneda link, while Tokyo/Narita (NRT/RJAA) sees load factors exceeding 70%, however, with heavy competition with LCCs yield is believed to be low (Skymark mulls pull-out from Narita and Yonago.). In the current fare war, the breakeven point for their Narita operations is estimated around 80-85%.

TOKYO/HANEDA
Sapporo/New Chitose (CTS/RJCC) was the highest, recording 90.9%, up 5.2% from the same period last year. The Fukuoka (FUK/RJFF) route saw the figure decrease by 7.2% to 73.1% as a result of capacity increase following the introduction of the Airbus A330 (Skymark Airlines inaugurates Airbus A330 service.). Kagoshima (KOJ/RJFK) was at 74.6%, Kobe (UKB/RJBE) saw 73.4%, Naha 86.1%, and Yonago 73.7%.

TOKYO/NARITA
Skymark competes with LCCs Jetstar Japan (GK/JJP) and Vanilla Air (JW/VNL) on two routes; New Chitose saw 77.2%, up 8.7% over last year, and Naha was at 76.4%, down 1.6%. The Yonago link sees no competitor, but the figure was 30.9%.

YONAGO
All routes except for Haneda are struggling. Naha saw 43.5% while New Chitose was at 42.6% (Skymark expands Yonago, axes Asahikawa and Kumamoto.). Kobe remained low at 37.3%, while the Narita link was even lower, as mentioned above. On August 8th, Governor of Shimane Prefecture Shinji Hirai reported that Shinichi Nishikubo, Skymark's President and CEO, promised that "a complete withdrawal will not happen," though it could also mean all routes except for Haneda are at danger of being axed.

IBARAKI
Kanto's (Greater Tokyo) third airport at Ibaraki (IBR/RJAF) saw its Fukuoka route at 48.2%, and Nagoya/Chubu Centrair (NGO/RJGG) worst in the system at 24.3% (Skymark adds Fukuoka and Nagoya from Ibaraki.). New Chitose was 72.4%, up 6.4%.

SENDAI
Kobe saw 55.7% (Skymark announces Yonago and Sendai expansion.), while Fukuoka saw 64.6% (up 2.1%) and New Chitose saw 64.1% (up 2.2%).

OKINAWA/NAHA
Naha – Ishigaki posted 73.3%, an increase of 17.0% over the same period last year, while Naha – Miyako saw 70.9%, also an increase of 15.2%.

Reference: Aviation Wire, August 11th. (in Japanese)

New AirAsia Japan to be based at Nagoya Chubu Centrair.

AAJR, the temporary legal entity for the new Japanese arm of AirAsia (AK/AXM), officially changed its name to 'AirAsia Japan' (Mk II) and registered their headquarters at Nagoya/Chubu Centrair (NGO/RJGG) effective May 1st.

AirAsia Japan (Mk I) Airbus A320-214 JA01AJ lands at Narita in 2012. It is now with Indonesia AirAsia as PK-AZJ. (Photo: Aviation Wire)

The Malaysian LCC's first crack at the Japanese market with AirAsia Japan (JW/WAJ) (Mk I) (CoachFlyer JW8541: NRT - FUK on AirAsia Japan's Airbus A320.) ended in a divorce with joint-venture (JV) partner All Nippon Airways (NH/ANA), only 10 months after launching operations in August 2012, due to disagreements over how the airline would be run and other complicated reasons. It ceased operations on October 26th, 2013, and re-launched as Vanilla Air (JW/VNL) under 100% ANA ownership on December 20th (Vanilla Air launches operations.). 

So, as rumored and probably the most realistic option, Nagoya has indeed been chosen. It is Japan's third largest metropolitan area with a population of 8.9 million, but has been relatively underserved, mostly due to the fact that it is connected with the mega-cities of Tokyo and Osaka with the super-efficient (but expensive) Shinkansen. ANA operates the bulk of routes and Japan Airlines (JL/JAL) has minimum presence, while niche carrier Fuji Dream Airlines (JH/FDA) maintains a hub at Nagoya/Komaki (NKM/RJNA), the older airport near downtown. The first AirAsia Japan (Mk I) also set up a hub three months prior to the failed JV's divorce, while sister AirAsia X (D7/XAX) currently serves the airport four-times weekly from Kuala Lumpur (KUL/WMKK).

Earlier this February, AirAsia Group's Director Tony Fernandes revealed that talks are underway involving up to three 'like-minded' Japanese companies listed on the stock exchange to invest up to 70 million USD in initial start-up capital. Rakuten, originally an IT venture and now Japan's largest e-commerce firm, has been rumored as a partner, but nothing has been disclosed. Foreign ownership of Japanese airlines is capped at 33%, but having three partners instead of one or two would enable AirAsia to retain the biggest share. For their failed first try, they erred in giving ANA majority control at 67%.

The reincarnation is being led by former AirAsia Japan (Mk I) (JW/WAJ) head Yoshinori Odagiri, who has been appointed CEO, and Osamu Hata, who previously worked with Dell's Japan unit and has been appointed CFO (New AirAsia Japan names CEO; official launch in April.). The new AirAsia Japan (Mk II) is expected to launch domestic and regional international flights with Airbus A320s from Chubu Centrair as early as first quarter of 2015 (AirAsia plans return to Japan in 2015.). With the Tokyo Olympics/Paralympics coming up in 2020, LCC-dedicated Ibaraki (IBR/RJAH) is being considered as a focus city serving the Greater Tokyo region, however, AirAsia officials who visited last month have been concerned about the airport's tiny size.

Source: Traicy, May 19th. (in Japanese)

Skymark's new routes suffering low load factors.

Skymark Airlines' (BC/SKY) system-wide load factor for April, the first month of the Summer 2014 schedule, was 62.1%. Available seats went up 13.4% to 840,397 while total passenger number only increased 6.1% to 521,011. While its lucrative Tokyo/Haneda (HND/RJTT) slots continue to generate positive results, their recent foray into secondary markets is hurting the bottom line. Here's a summary of some of the details.

Boeing 737-86N(WL) JA73NT prepares for another flight from Haneda. (Photo: Ryosuke Yano)

GREATER TOKYO
From Haneda, Fukuoka (FUK/RJFF) was at the top with 84.9% (+0.8% from 1 year ago), while Yonago (YGJ/RJOH) was lowest with 53.1% (new from April 1st). Routes that saw the seventies were Kobe (UKB/RJBE) at 70.9% and Sapporo/New Chitose (CTS/RJCC) at 78.5%. At Tokyo/Narita (NRT/RJAA), Okinawa/Naha (OKA/ROAH) saw 57.0% (-0.9%) and New Chitose was at 46.0% (+17.4%). These routes see heavy competition (Skymark matches fares with LCCs at Narita.) from Jetstar Japan (GK/JJP) and Vanilla Air (JW/VNL). Its new focus city of Ibaraki (IBR/RJAH) saw new services to Fukuoka at 49.9% (new from April 18th) and Nagoya/Chubu Centrair (NGO/RJGG) at 22.8% (Skymark adds Fukuoka and Nagoya from Ibaraki.), while Kobe saw 57.1% (+2.2%).

SENDAI
Sendai's (SDJ/RJSS) new route to Kobe is showing 35.2% (new from April 1st), while Fukuoka was at 49.6% (+6.2%) and New Chitose at 39.4% (-3.3%). The Sapporo service sees competition from Air Do (HD/ADO).

YONAGO
Naha is doing the best at 46.3% (new from April 1st) (Skymark expands Yonago, axes Asahikawa and Kumamoto.), while Kobe showed 29.3%, New Chitose saw 18.7%, and Narita was at 22.2%.

OKINAWAN ISLANDS
Naha – Ishigaki (ISG/ROIG), which was launched on July 10th last year, saw 42.7%. Meanwhile, the Naha – Miyako (MMY/ROMY) route, which resumed on June 1st last year, recorded 57.8%.

As has been their profit structure (and similar for ANA and JAL as well), Haneda's 'bread-and-butter' operations account for over 80% of Skymark's revenue. Japan's third largest domestic carrier has been shifting strategy (Skymark posts loss but optimistic with strategy tweaks.) from a low-cost model to a hybrid model, as a means of survival and to differentiate itself among an increasing portfolio of LCCs. All-premium Airbus A380s and A330s (Skymark Airlines' first two Airbus A330s delivered.) will go after the affordable premium market for international and domestic, respectively, while the focus for domestic expansion is on secondary routes, where Skymark believes LCCs would not be able to produce enough yield.

President and CEO Shinichi Nishikubo reiterates that "Skymark now has (cash) strength to withstand initial losses," adding "we will not pull out in a short time like we used to." Will they be able to make these secondary markets work?

Source: Aviation Wire, May 14th. (in Japanese)

Skymark loads seasonal Sendai - Okinawa service.

On April 23rd, Skymark Airlines (BC/SKY) announced adjustments to their Summer 2014 schedule, including a new seasonal once-daily service between Sendai (SDJ/RJSS) and Okinawa/Naha (OKA/ROAH) to be operated from August 9th through September 15th. Flights to the largest Ryukyu city will also be increased from Tokyo/Haneda (HND/RJTT) and Nagoya/Chubu Centrair (NGO/RJGG) during this period.

Boeing 737-86N(WL) JA73NT moments before rotation at Haneda. (Photo: Ryosuke Yano)

New routes:
Sendai – Naha NEW 1 daily with 73H/738.
BC583 SDJ 0910 – 1205 OKA 73H/738 Daily *Aug/9 – Sep/15.
BC586 OKA 1820 – 2100 SDJ 73H/738 Daily *Aug/9 – Sep/15.

Frequency increases:
Chubu Centrair – Naha from 2 to up to 4. *Aug/9 – Sep/15. (3 during Jul/18 – Aug/30)
Naha – Miyako (MMY/ROMY) from 2 to 3. *Aug/9 – Sep/15.
Haneda – Naha from 6 to up to 7. *Aug/9 – Sep/15.

In addition, Skymark will also offer a second daily through-fare between Ibaraki (IBR/RJAH) and Naha via Kobe (UKB/RJBE). All of these services will be operated by 177-seat Boeing 737-800s. Abundant with coral reefs and beautiful beaches, Okinawa is a favorite summer vacation destination for the Japanese.

While their 36 prized slots at heavily-regulated Haneda generate roughly 80% of their revenue, Japan's third largest carrier continues to expand at its mini-hub at Kobe and focus cities of Ibaraki (Skymark adds Fukuoka and Nagoya from Ibaraki.), Sendai, and Yonago (YGJ/RJOH) (Skymark expands Yonago, axes Asahikawa and Kumamoto.).

Source: Skymark Airlines, April 23rd. (PDF; in Japanese)

Skymark adds Fukuoka and Nagoya from Ibaraki.

On April 18th, Skymark Airlines (BC/SKY) expanded operations at its Ibaraki (IBR/RJAH) focus city, located 80 kilometers northeast of central Tokyo, by launching twice-daily service to Fukuoka (FUK/RJFF) and once-daily to Nagoya/Chubu Centrair (NGO/RJGG). Both routes are operated by 177-seat Boeing 737-800s.

Boeing 737-8Q8(WL) JA737T takes off from Haneda on a cloudy afternoon. (Photo: Ryosuke Yano)

Skymark's Ibaraki operations:
Ibaraki – Fukuoka NEW 2 daily with 73H/738.
BC831 IBR 1015 – 1215 FUK 73H/738 Daily *NEW.
BC835 IBR 1515 – 1715 FUK 73H/738 Daily *NEW.
BC832 FUK 1250 – 1435 IBR 73H/738 Daily *NEW.
BC836 FUK 1750 – 1935 IBR 73H/738 Daily *NEW.

Ibaraki – Kobe (UKB/RJBE) 2 daily with 73H/738.
BC183 IBR 1230 – 1350 UKB 73H/738 Daily
BC187 IBR 1655 – 1815 UKB 73H/738 Daily
BC182 UKB 1040 – 1155 IBR 73H/738 Daily
BC186 UKB 1505 – 1620 IBR 73H/738 Daily

Ibaraki – Nagoya/Chubu Centrair NEW 1 daily with 73H/738.
BC867 IBR 2010 – 2110 NGO 73H/738 Daily *NEW.
BC862 NGO 0835 – 0940 IBR 73H/738 Daily *NEW.

Ibaraki – Sapporo/New Chitose (CTS/RJCC) 2 daily with 73H/738.
BC791 IBR 1115 – 1240 CTS 73H/738 Daily
BC795 IBR 1900 – 2025 CTS 73H/738 Daily
BC790 CTS 0910 – 1035 IBR 73H/738 Daily
BC794 CTS 1650 – 1815 IBR 73H/738 Daily

"We want our people to love the service so that it can be sustained," Yachie Yamaguchi, Deputy Governor of Ibaraki prefecture said at the inauguration ceremony, adding "We want to promote Ibaraki's splendors and increase in-bound passengers as the third airport (after Haneda and Narita) serving the Greater Tokyo (Kanto) region." From Ibaraki, Skymark already serves New Chitose, serving Sapporo, and Kobe, serving the Greater Osaka (Kansai) region, while through-fares are offered to Okinawa/Naha (OKA/ROAH) and Yonago (YGJ/RJOH) via their Kobe hub.

With Chinese LCC Spring Airlines (9C/CQH) being the only other carrier serving Ibaraki, Skymark is the sole domestic airline at Japan's first LCC-dedicated airport, which was named the 'Low-cost Airport of the Year 2011' by Australian aviation think-tank Centre for Aviation (CAPA). Skymark has found the airport convenient for those living in northern Greater Tokyo (Kanto), including the prefectures of Tochigi and Ibaraki. A two-hour but 500-JPY bus ride connects the airport with Tokyo Station as well. AirAsia Group is considering Ibaraki as one of its focus cities for its new Japanese venture (AirAsia plans return to Japan in 2015.) and officials made a visit on April 10th.

Source: Ibaraki Shimbun, April 19th. (in Japanese)

AirAsia plans return to Japan in 2015.

Speaking at the New Economy Summit 2014 in Tokyo on April 10th, AirAsia Group CEO Tony Fernandes revealed that a new joint-venture (JV) in Japan would be set up and be operational in 2015. "Everyone wants to come to Japan. We're going to make affordable and Japanese love to travel so I'm very bullish," Mr. Fernandes said.

AirAsia CEO Mr. Tony Fernandes speaking at the New Economy Summit 2014. (Photo: Aviation Wire)

Mr. Fernandes told the media that he had found "fantastic partners" who are "more like-minded," and "bright in technology, can talk to the government on equal terms, and revolutionize the Japanese market," though he refrained from disclosing any names. Asked by media whether Hiroshi Mikitani, CEO of Rakuten, is involved, Mr. Fernandes replied "he's a friend, and it might be better for us to remain only friends." Originally an IT venture, Rakuten is now Japan's largest e-commerce firm and a multinational internet business, and has been rumored to be AirAsia's partner.

As to where the new JV would be based, AirAsia has been searching for an airport that meets the following criteria; (1) open 24 hours and not slot-restricted, (2) minimum travel disruptions due to weather, (3) low-cost, and (4) not a hub for other LCCs. This essentially leaves Nagoya's Chubu Centrair (NGO/RJGG) as the top candidate, however, with 2020 Tokyo Olympics/Paralympics on the horizon, they are also eager to open a base in the Greater Tokyo area, and AirAsia officials visited Ibaraki (IBR/RJAH), a one-and-a-half-hour bus ride from Tokyo Station, also on April 10th. In other regions, Kobe (UKB/RJBE) and Sendai (SDJ/RJSS) are also being considered for focus cities.

Mr. Fernandes added "Haneda and Narita are too slot-restricted and too costly," and went on to say "Japan wants to increase visitors from overseas (to 20 million by 2020), but they're not building a LCC airport. Instead of trying to do something with Narita, why not build a new LCC-dedicated airport?"

Former AirAsia Japan (Mk I) CEO Mr. Yoshinori Odagiri will also head the new AirAsia Japan (Mk II). (Photo: Aviation Wire)

On February 13th, Mr. Fernandes mentioned on Twitter that they had named former AirAsia Japan (Mk I) (JW/WAJ) head Yoshinori Odagiri its CEO for the new AirAsia Japan (Mk II), along with naming Osamu Hata, who previously worked with Dell's Japan unit, its CFO (New AirAsia Japan names CEO; official launch in April.).

Their first AirAsia Japan (Mk I), a JV with All Nippon Airways (NH/ANA), was terminated last year only 10 months after starting operations in August 2012, due to complicated reasons including differences in how the airline would be run. It ceased flights in October 2013 (CoachFlyer JW8541: NRT - FUK on AirAsia Japan's Airbus A320.) and relaunched as Vanilla Air (JW/VNL) two months later (Vanilla Air launches operations.) under 100% ANA control. "For ice cream, you need chocolate and raspberry, not only vanilla," Mr. Fernandes referred to the former JV in a sarcastic manner. Talking about its first Japanese incarnation, "It was a nightmare, and probably for ANA too," he recalls, adding "We've always worked as one captain of the ship. When you have two airlines, there are two views on how to do things."

The group's long-haul arm AirAsia X (D7/XAX) launched flights to Chubu Centrair on March 17th, making it their third Japanese destination after Tokyo/Haneda (HND/RJTT) and Osaka/Kansai (KIX/RJBB). Although delays with its India venture in obtaining an air operator's permit (AOP) seem to be having some effect, nevertheless, AirAsia is expected to make a formal announcement for the reincarnation of a Japanese unit later this month or May. "We shall return like Caesar," Mr. Fernandes is bullish, adding "this could be – and I still believe it, it's a strong statement – probably the most profitable company within AirAsia".

Source: Asahi Shimbun, April 10th. (in Japanese)
Source: Traicy, April 10th. (in Japanese)
Source: Mainichi Shimbun, April 10th. (in Japanese) 
Source: Aviation Wire, April 10th. (in Japanese)

*Post edited/updated on April 11th.

Skymark posts loss but optimistic with strategy tweaks.

Skymark Airlines (BC/SKY) posted results for the first nine months (April to December) of fiscal year 2013; net income was 230 million JPY (94.4% decrease from the same period in 2012), total revenue was 65.3 billion JPY (0.8% decrease), and an operating loss of 181 million JPY (same period in 2012 saw a 6.29 billion JPY operating profit). It is expected to post the first full-year loss in five years for FY2013.

As majors All Nippon Airways (NH/ANA) and JAL continue to cut costs and come up with more aggressive measures, and LCCs now establishing a firm foothold in the core domestic markets, Skymark has been tweaking its strategy to avoid being caught in between the two. 

Boeing 737-8HX(WL) JA73NP at Haneda. (Photo: Ryosuke Yano)

In 2013, both ANA and JAL started offering tickets up to six months in advance with discounts around 70 to 80%. Skymark still offered less-expensive fares, but were only available from two months in advance, so with early-bookers going to the majors, these promotional fares didn't sell out as quickly as it used to, eventually hurting yields. 2014 will see them offer more advance tickets. Capacity has also been dumped in the 'bread-and-butter' Tokyo - Fukuoka market; Tokyo/Haneda (HND/RJTT) - Fukuoka (FUK/RJFF) sees JAL flying 17 round-trips, ANA flying 18, Skymark providing 11, and Star Flyer (7G/SFJ) with 10, while the Tokyo/Narita (NRT/RJAA) - Fukuoka route also sees three times daily each with ANA and JAL, and five daily with Jetstar Japan (GK/JJP). Again, these hurt yields. Skymark's answer is the Airbus A330 (Skymark to introduce the Airbus A330 on April 18th.) with affordable all-premium seating, akin to JAL's Class J domestic business class product, which often sells out quickly.

The Narita and Ishigaki (ISG/ROIG) markets have been disastrous, with all seven routes from the former bleeding red ink. Narita sees competition from LCCs Jetstar Japan, Vanilla Air (JW/VNL), and soon-to-launch Spring Airlines Japan, but numbers haven't been good for the rivals as well. Skymark's President and CEO Shinichi Nishikubo notes that for domestic services, Narita is "still immature and performing more like a Chiba Airport (and not a Tokyo Airport)", only attracting those who live in the prefecture where Narita is located. As for Ishigaki, it has become a new battleground of a fare war, with Peach Aviation's (MM/APJ) entry and JAL-subsidiary Japan Transocean Air (NU/JTA) lowering fares. In 2014, Skymark will consolidate its Narita network to only Okinawa/Naha (OKA/ROAH), Sapporo/New Chitose (CTS/RJCC), and Yonago (YGJ/RJOH), while the Ishigaki network will be simplified to just Naha.

On the other hand, the rapid devaluation of the JPY resulting from 'Abenomics' increased fuel costs. As for the fleet, the 31-strong Boeing 737 fleet will gradually be reduced to around 24 or 25 by the time its 10th A330 arrives. A previously announced plan to reconfigure its Boeing narrow-bodies with 20 premium seats have been shelved, and Skymark stated that freeing-up its B737s will instead enable them to pursue the charter market, which is relatively under-served, more aggressively. Group tours as well as high school graduation trips are on their minds. Some of their B737s are certified for ETOPS (Extended Twin-engined OPerationS), so charter flights to nearby international destinations such as Guam (GUM/PGUM), which they operated in 2010, are also possible.

Meanwhile, a large hangar Skymark rented at Haneda to open an A330 maintenance base will now be returned, as the carrier has signed an agreement with the European manufacturer for a Flight Hour Services (FHS) components contract. Heavy maintenance will be undertaken in Taiwan. The hangar rent cost them 800 million JPY a year.

Skymark is doing all it can to differentiate itself from the competition and carve out its own niche. What may seem like a dangerous bet configuring domestic A330s and planned international A380s with all-premium seating "is logical", according to Mr. Nishikubo, adding "demand for affordable premium seats is big but supply is small, both for domestic and international". While their 36 precious slots at heavily-regulated Haneda generate roughly 80% of their revenue, the carrier is also building-up operations at its focus cities of Ibaraki (IBR/RJAH), Kobe (UKB/RJBE), Sendai (SDJ/RJSS), and Yonago, opening up new point-to-point routes that would be unprofitable at ANA and JAL's high costs, while also avoiding competition with LCCs (Skymark releases Summer 2014, expects FY2013 loss.). He adds "some LCCs don't seem to care if they make money or not, and we don't want to get into a fare war with them", possibly referring to Jetstar Japan, which was saved from further injections in October 2013 from shareholders JAL and Qantas Airways (QF/QFA) after hefty losses and running low on cash reserves.

As the first child of Japan's deregulation, and the only airline still truly independent from the heavyweights of ANA and JAL (excluding some commuter carriers), Skymark is definitely the most interesting Japanese carrier to watch. After all, Skymark has managed to break into the duopolistic domestic market, and its growth is what forced the majors to bring in LCCs, which otherwise probably still wouldn't have existed in Japan.

Source: Aviation Wire (in Japanese)

Skymark releases Summer 2014, expects FY2013 loss.

On January 29th, Skymark Airlines (BC/SKY) released the first part of their Summer 2014 schedule effective from March 30th through April 30th. Including previously announced plans, the airline is expanding ambitiously at its focus cities of Ibaraki (IBR/RJAH), Sendai (SDJ/RJSS), and Yonago (YGJ/RJOH), but suspending all services to Asahikawa (AKJ/RJEC) and Kumamoto (KMJ/RJFT). They are also cutting Ishigaki's (ISG/ROIG) non-stop links to Tokyo/Haneda (HND/RJTT), Tokyo/Narita (NRT/RJAA), and Kobe (UKB/RJBE), and will instead re-route passengers through Okinawa/Naha (OKA/ROAH). Through-fares to Ishigaki will be offered from Haneda.

Skymark's Boeing 737-800s await their next flights at Haneda. (Photo: Ryosuke Yano)

New Routes:
Ibaraki - Fukuoka (FUK/RJFF) new 2 daily with 73H/738. *From April 18.
Ibaraki - Nagoya/Chubu Centrair (NGO/RJGG) new 1 daily with 73H/738. *From April 18.
Kobe - Sendai new 2 daily with 73H/738. *From April 1.
Yonago - Naha new 1 daily with 73H/738. *From April 1.
Yonago - Sapporo/New Chitose (CTS/RJCC) new 1 daily with 73H/738. *From April 1.
Yonago - Haneda new 2 daily with 73H/738. *From April 1.

See also:
Skymark announces expansion at Ibaraki.
Skymark announces Yonago and Sendai expansion.

Frequency Increases:
Haneda - Kobe from 5 to 6 daily. *From April 1.
Haneda - Naha from 5 to 6 daily. *From April 1.
Haneda - New Chitose from 7 to 8 daily. *From April 1.

Frequency Reductions:
Haneda - Fukuoka from 11 to 10 daily. *From April 1.

Suspensions:
Kobe - Ishigaki.
Haneda - Asahikawa. *From April 1.
Haneda - Ishigaki. *Through-fare via Naha will be offered.
Haneda - Kumamoto. *From April 1.
Narita - Asahikawa. *From April 1.
Narita - Ishigaki.

Skymark is taking delivery of its first of 10 all-premium Airbus A330s in February, and will place it in service on the Haneda - Fukuoka route from April. A total of five will be delivered this year, with the remainder arriving in 2015. Meanwhile, two older Boeing 737-800s will be returned to their lessors in April and October, respectively, reducing the B737 fleet to 29. Their first Airbus A380 will arrive around August/September, to launch business/premium economy-only flights to New York/John F. Kennedy (JFK/KJFK) from December.

Skymark's first Airbus A380 is now under construction at Toulouse. (Photo: Airbus)

Skymark also announced that they are expecting a 1 billion JPY loss for fiscal year 2013, ending in March 2014, down from a 2 billion JPY profit forecast. Increased competition from LCCs as well as a stronger All Nippon Airways (NH/ANA) and Japan Airlines (JL/JAL) brought total revenue down 5.2% compared to FY2012 to 86.4 billion JPY, while the rapid devaluation of the JPY resulting from 'Abenomics' increased fuel costs. Expenses to prepare for the two new Airbus wide-body jetliners have also been higher than estimated, and the airline has delayed launching its frequent-flyer program, though it will likely be launched before they go international with the A380s.

Skymark is slowly transforming themselves from a LCC, though they have never classified themselves as such, to more of a hybrid airline. Most of the new domestic routes have no direct competitors, and the A330 and A380 products are something not offered by the majors nor by the LCCs. Finding itself caught in between the heavyweights and the new LCCs, 2014-2015 will see if the airline can carve out its own niche for survival.

Source: Skymark Airlines (PDF; in Japanese)
Source: Nikkei Shimbun (in Japanese)