Fallen Skymark

Why Skymark Airlines, Japan’s 3rd largest, Was Forced to File Bankruptcy

29 January 2014

Skymark Airlines, the third largest airline in Japan, will file bankruptcy according to Japan's civil rehabilitation processes. The airline will maintain its scheduled flights for time being while rebuilding its business.  This is the second case of airline bankruptcy after Japan Airlines in 2010.

1. The total debts of Skymark Airlines are reportedly amounting over JPY100 billion (USD 850 million), including penalty of USD700 million billed by Airbus for cancellation of A380s.
2. Yomiuri Shimbun cited two major faults that forced Skymark to bankruptcy.
3. First, its ambition to enter international routes, Skymark tried to purchase six-fleet of A380 with JPY190 billion, two times as large as its annual revenue. The decision was strongly asserted by Shinichi Nishikubo, President and CEO who owns 30% stake in the company, according to reports. But after all, cash-hungry Skymark was unable to pay the bills from Airbus and ultimately Skymark was charged of a penalty worth USD700 million.
4. Second, Skymark introduced  Airbus A330 (271 seats). Compared with Boeing 737 that the airline has been using , A330 is bigger in capacity but also bigger in expenses. With LCCs behind, Skymark tried to catch up with leading Japan Airlines and All Nippon Airways by means of differentiated services such as all-business class cabin and short-skirt clad flight attendants but its yield was not growing to match with huge investment and the investment itself was not realistic with its own management capacity.
5. With the sudden announcement in the evening of January 28, Skymark also told its reshuffle of management officers. Shinichi Nishikubo stepped down from its top officer seat. Tokyo Local Court,
6. Skymark holds 36 slots at Haneda (Tokyo) International Airport, a highly lucrative asset that other airlines may be attracted.  It was business strategy of Nishikubo to hold its third place in airline business in Japan by launching code sharing with Japan Airlines and ANA altogether that never took place after all.
7. With its cash dwindling day by day, once JPY30 billion was just JPY4.5, Skymark had no other choice but filing bankruptcy. That was a departure from its original policy to maintain business independence.