Skymark Airlines plans leap with A330s as domestic market in turmoil with first loss in five years

Time is conspiring against Skymark Airlines. Japan's third largest carrier is trying to execute a business change that is radical not just for itself but any low-cost carrier. Skymark has few recent successes to celebrate: the yen's depreciation is impacting costs while Skymark's business proves unfit for LCC competition and its future A330 deployment is repeatedly delayed, sending jitters to Japan's safety-conscious public. These troubles come after Skymark posted its first loss in five years at a not insignificant negative 2.9% operating margin. And that is just in the domestic market; internationally, Skymark publicly still intends to launch long-haul international flights with the A380, further elevating risk and complexity at what is already an unmanageable time.

This is not likely to be fatal, although the to-do list is certainly long. This first of a two part report looks at Skymark's domestic operation. The carrier's success remains intertwined with Tokyo Haneda, where Skymark plans to grow at the slot-constrained airport by using larger capacity A330s. Their entry into service is delayed, but that is more due to Japan's slow-moving regulatory environment rather than any underlying fault at Skymark. Meanwhile competing against Japan's new LCCs at Tokyo Narita is proving fruitless; Skymark lost JPY3,449 million (USD32.7 million) on Narita routes in the last nine months of 2013. Routes have been cut but others remain while Skymark hopes it can break out from being stuck in the middle between full-service and LCC competition.