Skymark sees Haneda as budget rivalry edge

Bloomberg

Skymark Airlines Inc., Japan’s largest discount carrier, expects to boost profits during the next fiscal year by adding more flights and using Tokyo’s Haneda airport as its hub to take on increased competition from three new airlines.

“It’ll be better than this year,” President Shinichi Nishikubo said in an interview in Tokyo last week, without elaborating. The Tokyo-based carrier has cut its profit forecast for the year ending March 31 by 13 percent because of higher fuel costs.

Skymark is counting on its larger fleet and established brand to help withstand the startups and competition that newcomer Jetstar has predicted will be “brutal.” The airline also expects that its hub at Haneda will give it an edge on Jetstar and AirAsia Bhd.’s new ventures, which will fly from Narita in Chiba Prefecture, some 65 km from downtown Tokyo.

“Most customers are still going to favor Haneda,” Nishikubo said. “Business passengers will also be willing to pay a premium to travel from a closer, more convenient airport.”

The carrier plans to take advantage of this readiness by introducing premium-economy seating on domestic flights from Haneda in 2014, Nishikubo said. The airline will operate the services with six Airbus SAS A330s, fitted with 89 premium- economy and 242 coach seats. The upper-tier seats will be about ¥2,000 more expensive, he said.

The move will bolster competition with Japan Airlines Co. and All Nippon Airways Co., the nation’s biggest airlines, which both have hubs at Haneda. Skymark flies to eight domestic destinations from the airport.

Skymark is also building up another hub at Narita and adding flights from Osaka’s Kansai International Airport. These two operations will have a “strong impact” on earnings in the second half of the next fiscal year, Nishikubo said.

“The Narita flights we’ve started so far have been making a decent profit and I expect that to continue,” Nishikubo said. The airline plans to serve nine domestic destinations from its Narita base, which opened last year, by September 2014.

The carrier expects net income to rise 22 percent to ¥7.7 billion in the year ending March 31. It earlier predicted a profit of ¥8.8 billion. The airline, which does not hedge fuel, is paying more for jet kerosene after prices rose more than 10 percent in Singapore trading in 12 months.

Skymark, which is listed on the startup Mothers section of the Tokyo Stock Exchange, has slumped 36 percent in the past six months, compared with a 2.5 percent decline by ANA, because of concerns about the new competition. JAL is not presently listed.