Business / Corporate

Skymark may fly international routes after restructuring, chairman says

Bankrupt carrier Skymark Airlines Inc. is weighing the possibility of starting overseas flights and is set to unveil a business plan by April as part of its turnaround, Chairman Nobuo Sayama said.

The plan will cover as many as five years starting April 1 and includes a consideration for an initial share sale by 2020, Sayama said in a Feb. 25 interview in Tokyo. At the end of this month, the company will exit a court-mandated rehabilitation program led by private equity firm Integral Corp., which owns a 50.1 percent stake. ANA Holdings Inc. has 16.5 percent of the company and a fund established by the Development Bank of Japan Inc. and Sumitomo Mitsui Financial Group Inc. owns the rest.

ANA, which is supporting Skymark in areas including code-sharing and aircraft maintenance, said it will not provide the overhaul needed for two of the carrier’s Boeing 737s to be certified as airworthy unless the smaller airline adopts its flight-booking system, Sayama said. Skymark will not agree to use ANA’s system because doing so will erode its independence, he said.

If Skymark “is placed under the umbrella of a major airline, it will lose its freedom of operation and won’t be able to maintain its independence,” said Sayama, who is also a partner at Integral. “We raised our hands to invest in Skymark because we thought Japan wouldn’t have any airline that’s run independently” if it fails, he said.

Since Skymark filed for bankruptcy protection in January 2015 it has ended the use of twin-aisle jets and cut flights to save costs. Sayama’s comments suggest Integral and ANA disagree over Skymark’s post-reform position. Skymark must defend its post as the so-called “third force” in Japan’s air-travel market, offering better service than low-cost carriers while selling cheaper tickets than dominant domestic players ANA and Japan Airlines Co., Sayama said.

Adopting ANA’s flight-booking system will not erode Skymark’s independence, Shoichiro Horii, a spokesman at Tokyo-based ANA, said Monday.

Skymark began service in 1998 after the government deregulated the domestic market to boost competition. Newer carriers such as AirDo Co. and Star Flyer Inc. are backed by ANA and have been increasing fares.

Skymark filed for bankruptcy protection with liabilities of about ¥300 billion, after it ran short of cash while trying to pay for A380 superjumbos from Airbus Group SE.

The carrier was making arrangements to have ANA overhaul two 737s in January and February, Sayama said. ANA told Skymark it was willing to adjust its own schedule for aircraft maintenance to handle the work by the end of March if Skymark introduced its flight system, he said.

ANA spokesman Horii said the carrier is in discussions with Skymark to sign a contract on maintenance.

“The company will offer support in accordance with the terms of agreement,” Horii said.

The two airlines agreed last year to start code-sharing flights from this October, but that has also stalled because of the flight-system standoff. Sayama said the two airlines should link up to each other’s networks to operate code-share flights instead of using a single system.

Skymark’s earnings are recovering even without code-share pacts, with the company expected to post an operating profit in the financial year ending March 31 as it fills more seats and fuel costs decline, Sayama said.

Sales will likely reach ¥70 billion, he said, compared with ¥80.9 billion a year earlier.

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