State-backed Industrial Revitalization Corp. of Japan said Friday it will bail out struggling discount airline Skynet Asia Airways Co., anticipating business to pick up with a route expansion.
The Miyazaki-based airline, saddled with a negative net worth of 1.43 billion yen, has become the 18th business to be assisted by IRCJ.
Under the bailout plan, the IRCJ will inject 3.4 billion yen into Skynet Asia by buying new common shares to be issued by the airline. The carrier will then be temporarily converted into an IRCJ subsidiary.
Skynet Asia’s 2.5 billion yen capital will be reduced by 900 million yen so that its stockholders share the burden of its performance.
In addition to IRCJ, the airline will also receive 200 million yen in capital from an investment fund set up by the Miyazaki Prefectural Government.
The current management team will be asked to step down.
Skynet Asia plans to launch service on a third route next April, and is said to be examining prospects of flying between Tokyo and Kochi or Oita.
Skynet Asia began operating in August 2002 with one route between Tokyo’s Haneda airport and the city of Miyazaki. Last August, it launched another route, between Tokyo and the city of Kumamoto.
Mounting investment costs dragged its finances into negative net worth, prompting the airline’s chairman, Mitsunori Mera, to announce Thursday its intention to seek help from IRCJ or venture capital firms.
IRCJ, set up in May 2003, is charged with helping revive heavily indebted companies deemed otherwise viable by buying their loans held by creditor banks other than their main banks.