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Skymark Airlines is a Japanese low-cost carrier based in Tokyo. The carrier, which commenced operations in 1998, operates domestic service from its base at Tokyo International Airport. Skymark is privately owned and is the only startup Japanese airline that has remained independent of the two Japanese majors, ANA and JAL.
Location of Skymark Airlines main hub (Tokyo Haneda Airport)
Skymark Airlines share price
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Skymark Airlines fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
377 total articles
39 total articles
Whisper it quietly, but Japan's low-cost carriers appear to be cannibalising traffic at All Nippon Airways and Japan Airlines. ANA and JAL carried 19% fewer passengers between Osaka and Sapporo in 2012 than 2010 despite the overall market growing 20%. This goes against the story all parties tell that LCCs are only increasing, not cannibalising, volumes. The cannibalisation is confined, so far, but there are signs of concern. ANA and JAL saw reduced traffic in 2012 on overlapping LCC routes despite overall 2012 traffic being the strongest in nearly five years.
ANA and JAL are responding differently to LCCs. The nuances reflect their wider outlook – and fears. JAL is more aggressively cutting capacity on overlapping LCC routes while ANA is sometimes growing. In the medium-term, JAL expects to cut overall domestic capacity in line with the country's shrinking nature while ANA plans growth. JAL's cuts have been rewarded with higher load factors while ANA's growth has seen lower load factors, but all load factors need improvement.
LCCs help Japanese domestic market grow for first time in six years, but market situation still dire
The introduction of three low-cost carriers to Japan in 2012 – Peach, Jetstar Japan and AirAsia Japan – may still be fragile with Jetstar Japan curtailing growth and AirAsia Japan losing its founding partner, but the three are showing meaningful improvements to the Japanese economy. In the 12 months to 31-Mar-2013, their passenger traffic has given the Japanese domestic air market, the world's third largest, a needed bump by helping it grow for the first time since 2006.
But the situation is still dire. 2012 was only the third year of growth since 2002, and passenger numbers in 2012 are the same as they were in 1997. No other major market in the world – and high-growth Asia especially – has seen such abysmal performance. International traffic fared only slightly better, with 2012 traffic around only 1999 levels. And despite innovation and new best practices, load factors in the domestic market are at the same low 60% figure of two decades ago. Incumbents have signalled they must change. LCCs may force it.
When JAL was going through bankruptcy in 2010/11, Delta Air Lines pulled all the levers to establish a JAL/Delta alliance. But JAL was persuaded to remain with its oneworld partners. With ANA staying firmly in the Star Alliance camp and only two major network airlines in Japan, this left Delta as the extra leg. Each of the other alliances has anti-trust immunised trans-Pacific partnerships, a substantial market advantage. Skymark Airlines had meanwhile quietly been establishing as a profitable low cost domestic operator. Next year it receives the first of its six A380s and plans to fly - in all-premium configuration - to New York.
So when Delta seeks greater access to Tokyo Haneda Airport, where Skymark is conveniently based, the prospects for a partnership become real. Delta CEO Richard Anderson is calling on the Japanese Government to let Delta move its main Japanese base from Narita to Haneda, but Delta would probably be satisfied just to receive additional Haneda slots.
The proposal comes as the Japanese yen weakens, hurting Delta's outbound Japanese market. A Haneda base would make Delta flights more attractive and greatly enhance operational cooperation with Skymark. The feelings will have to be reciprocal and so far Skymark has chosen independence, but the weakening yen has partially caused Skymark to post a USD25.1 million loss in 1Q2013 compared to a USD600,000 profit a year earlier. As Skymark prepares to launch its ambitious trans-Pacific A380 services, a Delta partnership could offer much needed US feed for its New York route, where the Skymark brand is unknown.
Asian airline costs and efficiencies vary widely. Compared to Europe, the region is home to efficient LCCs like AirAsia, which on a stage length-adjusted basis is more efficient than Vueling or easyjet – but perhaps not Ryanair. Thai Airways is the most efficient of the major full-service Asian airlines, but it is not much more efficient than Finnair, one of Europe's leanest carriers. But Thai is certainly more efficient than many of Europe's full-service airlines, which have similar costs and stage lengths, unlike Asia's full-service carriers that occupy a wide spectrum. At the top end is Japan's All Nippon Airways, which rivals SAS' costs – Europe's most expensive major airline.
These are some of the findings from CAPA's examination of Asian airline costs. Geography and local labour costs only partially dictate total airline costs: three Japanese airlines are the most expensive in this sample. Yet Japan's independent LCC, Skymark is cheaper than any Chinese carrier while one of Asia's most efficient full-service airlines – Singapore Airlines – is from a country with a cost of living closer to the West than other parts of Asia. Many of Asia's full-service airlines need to shape up – and LCCs need to maintain cost discipline for when the cost gap is inevitably narrowed.
Softening financials and profit downgrades are beginning to reflect strategic weakness at Skymark, Japan's third-largest airline that is still an entirely domestic-only carrier – but with significant expansion plans that over the next two years includes introducing A330 and A380 aircraft. Skymark increasingly looks caught in the middle of, at the top end, full-service carriers All Nippon Airways and Japan Airlines, which have wide networks, affording them considerable scale. That is something Skymark – one quarter the size of JAL, and less than a fifth the size of ANA – cannot match.
At the bottom end are Japan's new-entry low-cost carriers that are much smaller than Skymark but growing with a lower cost base. Skymark cannot match the low-cost of the LCCs or the premium and network advantages of ANA and JAL. It has succeeded so far in securing slots at the convenient Tokyo airport of Haneda, but this advantage is drying up.
While Skymark management has a mindset worlds away from the bloated legacy views that brought JAL into bankruptcy, Skymark has yet to capitalise on this to become an efficient hybrid carrier open to global partnerships – a possibility that could re-define Asian aviation.
Few airlines have made all-premium cabins work, with the list of withdrawals ranging from fly-by-night operators to Singapore Airlines' withdrawal from its non-stop A340-500 New York and LA services. But Japan’s third-largest airline, Skymark, is looking to buck the trend by using all-premium A330-300s on trunk routes in the domestic Japanese market. Skymark only operates domestically at present, although regional and long-haul destinations are on the cards.
The plan is not as foolhardy as history suggests. In fact, Skymark Airlines may have one of the best chances of succeeding in the all-premium space. “All-premium” has generally meant business class, for most of the attempts have been in this cabin. But Skymark is effectively planning an all-premium economy cabin, seating 271 in an A330-300, compared to 116 that Hainan Airlines tried on A330-200s and only 100 on Singapore Airlines’ A340-500s. Skymark wants to differentiate itself in the high yield domestic market from ANA and JAL, which have cramped domestic cabins (despite averaging below 70% load factors).
Combined with Skymark’s significantly lower operating cost, its proposition may find healthy traction.
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