Skymark Airlines codeshare with incumbents is low-risk to Japan – but perhaps a concern for ANA/JAL

Tokyo is making one of its boldest interventions yet in Japanese aviation by orchestrating a tripartite cooperation that will involve rivals All Nippon Airways and Japan Airlines codesharing with Skymark. Japan's third largest carrier, Skymark was earlier this year forced to withdraw from an over-optimistic plan to take six A380s. That left Skymark with an enormous penalty on top of the larger than expected start-up costs for its A330s. Tokyo aims to ease Skymark's current deficit by having the ANA and JAL codeshares boost Skymark's revenue. The codeshares as envisioned will not directly address Skymark's daily costs or the A380 penalty.

The codeshares are due to be on five of Skymark's routes from Tokyo Haneda that collectively accounted for 46% of Skymark's Oct-2014 capacity. Load factors in recent times have dipped - not due to falling passenger numbers but because expansion has been leading demand. An important question is what happens after the five year codeshare, when ANA and JAL passengers have experienced Skymark's cheaper, and in some cases, better product. Skymark in coming years could enhance its offerings - loyalty, partnerships, corporate contracts and even alliance membership - and then seek to keep ANA and JAL passengers once the codeshare is over. ANA and JAL must balance appeasing Tokyo while potentially empowering a competitor.