Bloomberg News

Skymark Air Drops After Lowering Profit Forecast: Tokyo Mover

February 13, 2012

Feb. 13 (Bloomberg) -- Skymark Airlines Inc., Japan’s largest low-fare carrier, fell the most in more than two weeks in Tokyo trading after it lowered its annual profit forecast amid higher fuel prices.

Skymark fell as much as 8.8 percent, the biggest intraday decline since Jan. 27, to 673 yen, and traded at 683 yen as of 10:09 a.m. on the Tokyo Stock Exchange.

The carrier lowered its net income forecast 13 percent to 7.7 billion yen ($99 million) for the year ending March 31, the company said on Feb. 10 after markets closed. Skymark is also bracing to withstand competition from three new budget carriers that will start flights this year in Japan.

“The market is taking a dislike to the forecast downgrade,” said Ryota Himeno, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. “Oil prices have been on the upturn since January and if this continues, then it’s going to impact next fiscal year’s earnings as well.”

Skymark has tumbled 44 percent in the past six months amid concern that competition from new airlines will damp profit. The airline is counting on its larger fleet and established brand to help withstand the startups and competition that newcomer Jetstar has predicted will be “brutal.”

Jetstar Japan Co., which is backed by JAL and Qantas Airways Ltd.’s Jetstar unit, will begin flights from Narita airport later this year using three planes. It aims to increase its fleet to 24 within a few years.

AirAsia, Peach

AirAsia Japan Co., a venture between All Nippon Airways Co. and AirAsia Bhd., the region’s biggest low-cost carrier, also intends to start flying from Narita this year. Peach Aviation Ltd., backed by ANA and Hong Kong-based Far Eastern Investment Group, will start flights from Kansai airport next month.

Skymark President Shinichi Nishikubo said in a Feb. 9 interview in Tokyo that the airline’s profit will rise next fiscal year as it adds more flights and uses a base at Tokyo’s downtown airport.

Skymark is building up a hub at Narita and adding flights from Osaka’s Kansai. These two operations will have a “strong impact” on earnings in the second half of the next fiscal year, Nishikubo said.

“The Narita flights we’ve started so far have been making a decent profit and I expect that to continue,” Nishikubo said. The airline plans to serve nine domestic destinations from its Narita base, which opened last year, by September 2014.

The carrier expects net income to rise 22 percent to 7.7 billion yen in the year ending March 31. It earlier predicted a profit of 8.8 billion yen. The airline, which doesn’t hedge fuel, is paying more for jet kerosene after prices have risen 4.4 percent in Singapore trading since Skymark last announced its earnings.

--Editors: Vipin V. Nair, Garry Smith

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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