Skymark Airlines Inc., Japan’s third-largest carrier, filed for bankruptcy protection after running short of cash, hastening the downfall of a low-fare airline and its growth ambitions that climaxed in an ill-fated purchase of six Airbus A380 superjumbos.
The carrier filed at the Tokyo District Court with 71 billion yen ($603 million) in liabilities, according to a statement to the Tokyo stock exchange. President Shinichi Nishikubo is stepping down and Chief Financial Officer Masakazu Arimori will take the role. The company will be delisted from the exchange March 1, the bourse said in a separate statement.
Skymark will get financial support for restructuring from private-equity firm Integral, according to the statement.
Skymark first flagged in July there was “material uncertainty” over whether it will remain a going concern as it may have to pay a penalty to Airbus Group NV, reiterating that position again in November. In July, Airbus terminated an order for six A380s from the Japanese carrier, a decision the planemaker said stemmed from “the airline’s expressed intentions for the aircraft.”
Takahiro Nosaka, a Tokyo-based spokesman for Airbus, declined to comment.
Skymark’s plans to consider bankruptcy comes five years after Japan Airlines Corp. filed for the country’s fourth-largest bankruptcy under a 900 billion yen turnaround plan.
Japan Air Bankruptcy
Four government bailouts had failed to revive Asia’s most indebted carrier, which on Jan. 19, 2010 applied for protection from creditors at Tokyo District Court with 2.32 trillion yen in liabilities. JAL, which re-listed in 2012, was Asia’s first major flag carrier to seek bankruptcy.
Skymark had 4.5 billion yen in cash and near cash items as of Sept. 30, down 75 percent from the same time a year earlier, according to data compiled by Bloomberg. The airline had 2,275 employees as of March last year.
The carrier had a net loss of 5.7 billion yen in the six months to Sept. 30, amid increasing competition, the costs of introducing A330 planes, and a weaker yen pushing up fuel costs. Tokyo-based Skymark was planning to halt unprofitable flights from Narita airport and return two planes it leased from November, it said in October. The airline will also sell and lease back engines, a flight simulator and other assets to increase cash.
Skymark paid 26.5 billion yen in pre-delivery payments for the double-decker planes, including money to the engine and other parts makers, it said in July.
It also sought a tie up with Japan Airlines Co. and ANA Holdings Inc. to continue operations. Last month, the airline said it was considering selling shares to an investment fund to raise cash.
Skymark shares rose 0.6 percent to 317 yen at the close of trading in Tokyo today. The shares have slumped in each of the past four years.
Shares of Skymark had plunged after Airbus terminated the order for six A380s — worth $2.5 billion in list prices. The European planemaker lost its only superjumbo customer in Japan.
The carrier could face demands for as much as 70 billion yen in penalties, Kyodo News reported in July, citing people familiar with the situation that it didn’t name. The airline and the planemaker were negotiating to reduce the penalty.
Skymark announced a decision to buy double-decker A380s and start an international business-class service in 2010, breaking from the company’s model of low-fare travel using single-aisle Boeing Co. 737s. Nishikubo said at the time he planned to win market share by charging less than half the price of rivals.
Skymark initially signed a firm contract for four A380s in 2011 and later came back for two more. Airbus said in April that Skymark’s first A380 performed its maiden flight and was heading for cabin installation and final painting in Germany.