Skymark to pull out of Sendai in October.

On April 24th, Skymark Airlines [BC/SKY] submitted plans to Japan's Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) to suspend its twice-daily Sendai [SDJ/RJSS] – Kobe [UKB/RJBE] service from the Winter 2015/2016 timetable, effective October 25th. The embattled airline would thus be dropping the city entirely, as it is the last remaining route from the former focus city (Skymark announces Yonago and Sendai expansion.).
 

Boeing 737-86N(WL) JA73NX taxies at Narita. Skymark axed Narita in October last year (Skymark announces Narita closure and Yonago cuts.), Ishigaki and Miyako in March, and will drop Yonago in August (Skymark decides to close Yonago, keep Ibaraki.), and now Sendai in October. (Photo: Ryosuke Yano)

Sendai used to see Skymark flights to Fukuoka [FUK/RJFF] and Sapporo/New Chitose [CTS/RJCC], but these were quickly axed (Skymark to cut 15% of flights, ground all Airbus A330s.) after they filed for bankruptcy protection (Skymark to file for bankruptcy.). Kobe, another focus city, was the last remaining route, but it was seen as a matter of time as load factors hovered around an embarrassing 20-40%. March 2015 was a better month at 43.7%. 177-seat Boeing 737-800s operate the route.

Japan's third largest airline entered Sendai, Tohoku (Northeastern Japan) region's biggest metropolitan area, on April 20th, 2013 with flights to Fukuoka and New Chitose, only eight days after LCC Peach Aviation [MM/APJ] launched flights from Osaka/Kansai [KIX/RJBB] on April 12th. Ironically, the latter has since increased to three-times daily and announced intentions to make Sendai a hub (Peach plans Sendai hub by Summer 2017.), while Skymark has decided to pull out completely. It is lower cost, but not as low as the LCCs to stimulate demand.

On April 22nd, Skymark signed a Memorandum of Understanding (MoU) with equity firm Integral and ANA Holdings, parent of All Nippon Airways [NH/ANA], to sponsor the cash-strapped airline out of bankruptcy (Skymark gives in to ANA; Japan reverts to duopoly.). Details of the corporation rehabilitation plan, which needs to be submitted to the Tokyo District Court by May 29th, have yet to be disclosed, however, it will likely include code-sharing, joint fuel purchasing, and joint crew training with ANA. A re-branding is also being considered, with SKY bee a reported contender (Skymark hints at new brand: SKY bee?).

Source: Kobe Shimbun, April 24th. (in Japanese) 
Source: Nikkei Shimbun, April 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 takes ANA & JAL dual tie-up, axes Sendai – Sapporo.

Skymark Airlines [BC/SKY] is preparing to submit a code-share pact with both All Nippon Airways [NH/ANA] and Japan Airlines [JL/JAL] to the Japan Civil Aviation Bureau (JCAB), hopefully in time for March 29th, the beginning of the Summer 2015 timetable. The deadline for applying for domestic routes for this summer was January 21st, but the three carriers put off submitting the dual partnership as "preparations couldn't make it in time," according to both ANA and JAL.

Airbus A330-343E JA330B is pushed back at Haneda. What was a product to better compete with ANA and JAL became part of their cost burden, decreased load factors, and is now calling for its two archrivals to help fill its seats. (Photo: Aviation Wire)

"We need to understand the details of Skymark's policies," said an ANA spokesperson, while its counterpart at JAL also said "We are currently evaluating the proposal to make it in time for March 29th." Under the scheme, ANA would place its code on all five of Skymark's five routes from Tokyo/Haneda [HND/RJTT]; Fukuoka [FUK/RJFF], Kagoshima [KOJ/RJFK], Kobe [UKB/RJBE], Okinawa/Naha [OKA/ROAH], and Sapporo/New Chitose [CTS/RJCC]. JAL will place its code on all but to Kobe, where it no longer has a presence. There's no deadline for code-sharing, however, the more it is delayed, the shorter the time they have to sell the seats.

The code-share pact is vital for Japan's third largest carrier to stay afloat, as selling 20% of its seats on routes from Haneda is expected to generate an annual 8 billion JPY in increased revenue. Skymark is also negotiating with four financial institutions for capital injection through third-party allocation of new shares. The number of shares is expected to be increased by up to 25%, and to receive approval they have called for an extraordinary (emergency) shareholders' meeting, though the February 18th date has been postponed to a later date.

Rumors circulated in early January that Skymark was evaluating an investment from ANA (Running out of time: Will Skymark join ANA?), however, that seems to have been shelved. ANA's reported acquisition of just a few points short of 20% of Skymark's shares on condition that the Airbus A380 cancellation penalty (Skymark hopes to settle Airbus A380 penalty in October.) is settled and most significantly, current senior executives are replaced by those from ANA, was probably unacceptable to the troubled carrier, whose President and CEO Shinichi Nishikubo has reiterated "We take great pride that we have been independent without the help of any major carriers, which has enabled us to change the industry significantly."

Meanwhile, the cash-strapped airline also announced they would be suspending its three-times daily Sendai [SDJ/RJSS] – New Chitose service on March 28th. Its load factor has been hovering around 30-40% in recent months. The route sees competition from AIRDO [HD/ADO] (d.b.a. Air Do), ANA, IBEX Airlines [FW/IBX], and JAL. Its until recently focus city of Yonago [YGJ/RJOH] (Skymark mulls Yonago pull-out and Sendai cuts.) will continue to see nonstop service to Kobe and Naha, however, if load factors do not improve during Summer 2015, they are probably the next in line for the axe.

In other news, Skymark's all-premium 271-seat Airbus A330 (Skymark Airlines inaugurates Airbus A330 service.) will be deployed on the Haneda – Naha route starting on June 1st, when the southern beach resorts become popular in the summer months. It becomes the third A330 route after Fukuoka and New Chitose.

Source: Skymark Airlines, January 21st. (in Japanese) 
Source: Nikkei Shimbun, January 21st. (in Japanese)

Skymark mulls Yonago pull-out and Sendai cuts.

Skymark Airlines [BC/SKY] is reportedly considering pulling out from Yonago [YGJ/RJOH] completely, axing its remaining two routes from the eastern Tottori prefecture airport to Kobe [UKB/RJBE] and Sapporo/New Chitose [CTS/RJCC] at the end of August 2015. Its link between Tokyo/Haneda [HND/RJTT] and Yonago was promised to be resumed (Skymark's fate: MLIT discourages foreign investment.) from the Summer 2015 schedule, but that too would be canceled. In addition, Sendai [SDJ/RJSS] – New Chitose is also likely to be terminated in March 2015.

Boeing 737-86N JA737M was returned to lessor GECAS in October as N854TM. It now plies the skies of neighbor South Korea with Jeju Air as HL8020. (Photo: Ryosuke Yano)

Yonago had long been only served by All Nippon Airways [NH/ANA] until December 20th, 2013, when Skymark launched twice-daily service each to Tokyo/Narita [NRT/RJAA] and Kobe [UKB/RJBE], designating it a focus city, before quickly adding two daily to Haneda, one to New Chitose, and another to Okinawa/Naha [OKA/ROAH] (Skymark announces Yonago and Sendai expansion.) from April 1st, 2014. 177-seat Boeing 737-800s operated all routes.

However, after the rapid depreciation of the JPY, high fuel prices, intensified competition with LCCs, and costs related to the introduction of the Airbus A330 (Skymark Airlines inaugurates Airbus A330 service.) and the now-canceled A380 (Skymark's Airbus A380 order in jeopardy.) pushed Skymark to a whopping 5.7 billion JPY loss during only the first quarter (Skymark posts 5.7 billion JPY loss for 1Q FY2014.), they quickly started winding down Yonago. Haneda, Narita, and New Chitose were all axed at the end of October (Skymark announces Narita closure and Yonago cuts.). The Narita route saw load factors treading around an embarrassing 20-30%, while others did not perform much better showing 40-50%. The Haneda link was recording a modest 50-60%, but with ANA retaliating by slashing fares, yields were low.

Sendai – New Chitose has been Skymark's poorest performer since the October closure of Narita and reductions at Ibaraki [IBR/RJAH] and Yonago, with load factors hovering around 30-40%. The capital city of Miyagi prefecture, which is by far the biggest city in northeastern Japan, is also a focus city for the troubled third largest domestic carrier. Its double-daily flights to Fukuoka [FUK/RJFF] fared better with load factors showing 60-70%, while its single daily to Kobe has not been impressive at around 40-50%. 

Source: Asahi Shimbun, December 19th. (in Japanese)

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)

Skymark mulls pull-out from Narita and Yonago.

Skymark Airlines (BC/SKY) is considering completely pulling out of Tokyo/Narita (NRT/RJAA) on October 25th, the end of the Summer 2014 timetable, and possibly downgrade Yonago (YGJ/RJOH) to a spoke city, in an effort to cut unprofitable routes and restructure their network after heavy losses (Skymark posts 5.7 billion JPY loss for 1Q FY2014.) and a likely hefty penalty from Airbus for the A380 cancellation (Skymark's Airbus A380 order in jeopardy.).

Boeing 737-8HX(WL) JA73NB taxies at Okinawa's Naha Airport. (Photo: Ryosuke Yano)

From Narita, Japan's third largest carrier currently operates two daily round-trips each to Okinawa/Naha (OKA/ROAH), Sapporo/New Chitose (CTS/RJCC), and Yonago, but these were intended to feed their long-haul international routes that were to be operated by the Airbus A380. Now that the order has been canceled and international plans shelved, there is no need for them to keep a domestic network at Narita, which used to include Asahikawa (AKJ/RJEC), Ishigaki (ISG/ROIG), and Kobe (UKB/RJBE) as well.

Although Naha and New Chitose show latest load factors (June) of 64.5% and 67.9%, respectively, above the system-wide average of 65.6%, low-season rates dropped to 50-60% in FY2013. With both 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, and thus hasn't been able to produce enough yield. The Yonago link continues to bleed with a June load factor of 28.1%.

Meanwhile, its Yonago focus city, which was only added to the network on December 20th last year and expanded from April (Skymark expands Yonago, axes Asahikawa and Kumamoto.), has not seen improved results. The latest load factor (June) for the daily New Chitose round-trip was 43.6%, while the also once-daily Naha link was at 45.6%, and their Kobe flight at 45.0%. Their twice-daily Tokyo/Haneda (HND/RJTT) service was doing best at 59.0%, but still below the system-wide average, while the Narita link was at a miserable 28.1%, as aforementioned. Yonago could see all but its Haneda flights axed, if not a complete closure.

Although international ambitions for Narita have been shelved, Skymark will now ask the government for midnight slots at Haneda to use its A330s (Skymark Airlines inaugurates Airbus A330 service.) for routes to Hawaii, Singapore, and Thailand. The A330s currently serve only domestic routes, and therefore sit on the ground at night, so this would enable them to increase utilization and go international without additional aircraft acquisition costs. Their A330s are fully equipped with long-haul-compatible galleys. However, this plan does have its share of regulatory hurdles it has to overcome.

Meanwhile, rumors of an AirAsia Japan (Mk II) (AirAsia Japan is officially reborn; first flight June 2015.) tie-up (and investment in Skymark) are circulating, though their CEO Yoshinori Odagiri has commented "Nothing has materialized, but we keep all doors open." AirAsia Japan is craving for Haneda rights and Skymark has 36 precious slot-pairs there, however, these generate roughly 80% of their revenue and it is unlikely they would let them go. Skymark hopes they can continue to go it alone, but with cash reserves dwindling and Airbus seeking up to 70 billion JPY for the A380 cancellation, the airline has admitted their business is at risk without outside financial support.

Reference: Aviation Wire, July 11th. (in Japanese) 
Reference: Aviation Wire, August 6th. (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 expands Yonago, axes Asahikawa and Kumamoto.

On April 1st, Skymark Airlines (BC/SKY) expanded their Yonago (YGJ/RJOH) focus city with the launch of double-daily Tokyo/Haneda (HND/RJTT) flights plus a daily round-trip each to Okinawa/Naha (OKA/ROAH) and Sapporo/New Chitose (CTS/RJCC). Two daily round-trips between Kobe (UKB/RJBE) and Sendai (SDJ/RJSS) were also started on the same day. Schedules were posted (Skymark announces Yonago and Sendai expansion.) in an earlier update. All are operated by 177-seat Boeing 737-800s.

Boeing 737-8FZ(WL) JA73ND taxies for departure at rainy Haneda. (Photo: Ryosuke Yano)

Skymark now offers non-stop services to five cities from Yonago, a city the airline only started serving on December 20th, 2013. Competitor All Nippon Airways (NH/ANA) flies six round-trips between Haneda and Yonago, while just 33 kilometers (20 miles) west at Izumo (IZO/RJOC), Japan Airlines (JL/JAL) operates five dailies to Haneda, along with five round-trips to Osaka/Itami (ITM/RJOO), three to Fukuoka (FUK/RJFF), and one to Oki (OKI/RJNO) flown by JAL subsidiary Japan Air Commuter (3X/JAC). Skymark saw a decently-sized market served only by legacy carriers with no near-term LCC penetration.

Skymark's short-skirt flight attendants on board their new Airbus A330. (Photo: Aviation Wire)

On the inaugural day, to the surprise of all, all flight attendants and some ground staff serving these four new routes, along with Okinawa/Naha (OKA/ROAH) - Ishigaki (ISG/ROIG), wore Skymark's controversial miniskirt one-piece uniform, which are to be introduced on the company's new Airbus A330s in May. It was only for this one day on April 1st, and was a play not only to promote the limited-time uniforms, but to probably convince the public that it is not a safety risk to passengers nor the flight attendants (Miniskirt turbulence at Skymark Airlines?).

Meanwhile on March 31st, Skymark operated their last flights to and from Asahikawa (AKJ/RJEC) and Kumamoto (KMJ/RJFT), with BC606 and BC208, services to Haneda, respectively. As a lower-cost carrier, Skymark's decision is quick, both when launching and abandoning new routes.

Source: Yomiuri Shimbun, April 1st. (in Japanese)

Skymark to bring the Airbus A380 to Kobe.

Skymark Airlines (BC/SKY) said they are planning to bring the Airbus A380 to Kobe (UKB/RJBE) later this year for display and events. The third largest domestic carrier intends to take delivery of their first example, A380-841 JA380A, around August or September this year, and start utilizing the type in December to inaugurate Tokyo/Narita (NRT/RJAA) - New York/John F. Kennedy (JFK/KJFK), their first scheduled international route.

Skymark's first Airbus A380-841, JA380A, takes shape at Toulouse. (Photo: Airbus)

According to President and CEO Shinichi Nishikubo, bringing the A380 to Kobe would "be a chance to let people in the Kansai (Greater Osaka) region know that Skymark has a hub in Kobe", implying increased competition with Peach Aviation (MM/APJ). Skymark is the biggest carrier at Kobe flying 19 round-trips daily to Ibaraki (IBR/RJAH), Ishigaki (ISG/ROIG), Kagoshima (KOJ/RJFK), Nagasaki (NGS/RJFU), Okinawa/Naha (OKA/ROAH), Sapporo/New Chitose (CTS/RJCC) Tokyo/Haneda (HND/RJTT), and Yonago (YGJ/RJOH), accounting for about 70% of total flights. Ishigaki will be suspended from March 30th, and Sendai (SDJ/RJSS) will be launched from April 1st.

Kobe celebrated its eighth birthday on February 16th, however, its passenger numbers for fiscal year 2012 was 160,000 less than the year before and has been decreasing. The Greater Osaka region's has three other airports which include Itami (ITM/RJOO), Kansai (KIX/RJBB), and mostly general aviation Yao (RJOY), and the advent of homegrown LCC Peach at Kansai Airport has especially had a big impact on the area's cost-conscious travelers. Skymark, together with Kobe Airport, are pinning hopes that building up routes to secondary cities that LCCs so far cannot profitably fly to would make Kobe a viable domestic hub competing with Kansai and Peach.

Located in Osaka's neighbor city of Kobe, the airport is actually only a 40-to-50-minute train ride from central Osaka, while convenient Itami is about 30 to 40 minutes, and Kansai is farthest at around 1 hour with an express train. However, the Japan Civil Aviation Bureau (JCAB) limits the number of flights at Kobe to 30 slot-pairs per day, citing air traffic control (ATC) safety issues which arise from having four airports in a 25-kilometer radius, limiting growth. In reality, this has been seen as a government's move to protect loss-making Kansai Airport's profits and status as Osaka's premier hub, as Kansai sees far less congestion than at Tokyo's Haneda or Narita airports and is not slot-restricted at all.

Source: Asahi Shimbun, February 17th. (in Japanese)

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)