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Skymark Surges on Report AirAsia Considering Takeover Bid

August 19, 2014

Skymark to operate Airbus A330-300

Skymark's cabiin crews, wearing a new unform, show green seats of the new Airbus A330-300 at Haneda Airport in Tokyo. The Skymark Airlines Co. Japan's third largest airline, became the first Japanese carrier to operate the Airbus aircrafts. Photographer: The Yomiuri Shimbun via AP Images

Skymark Airlines Inc. (9204) gained the most in almost six years in Tokyo trading as AirAsia Bhd. was said to be considering support, including taking a stake in the airline.

Skymark climbed 28 percent, the most intraday since 2008, to close at 230 yen. The stock held its gain even after Tony Fernandes, AirAsia group chief executive officer, said in a post on Twitter that his company isn’t interested in the Japanese airline.

AirAsia, the region’s largest low-cost carrier, is in discussions with financial institutions on ways to help Skymark, said a person familiar with the matter, who asked not to be identified because the discussions are private.

“Never seen such rubbish,” Fernandes said. “AirAsia has no interest in Skymark in Japan. There have been no discussions with Skymark.”

AirAsia last month said it picked Japanese e-commerce company Rakuten Inc. as a partner in a second attempt at Japan’s market after pulling out of a tie-up with ANA Holdings Inc. (9202) last year. With 36 slots at Tokyo’s Haneda Airport, Skymark is the only low-cost carrier with landing rights at Japan’s busiest air hub.

“To get slots, they would have to wait in line for allocations or acquire a stake in an existing airline,” Timothy Ross, a Singapore-based analyst at Credit Suisse Group AG, said by phone. “Japan is a challenging market, not just for AirAsia, but for others as well.”

Going Concern

Skymark said on July 31 there was “material uncertainty” over whether it would remain a going concern. The carrier’s net loss more than tripled to 5.8 billion yen ($57 million) in the quarter ended June as a weakening yen pushed up dollar-based fuel costs. The airline abandoned the planned purchase of six Airbus Group NV A380 superjumbos after paying 26.5 billion yen that may not be returned.

“The potential upside for AirAsia (AIRA) is large but it’s unclear what strategic benefit there would be to Skymark,” said Will Horton, a Hong Kong-based analyst at CAPA Centre for Aviation. “Government objections including impacts on Haneda slots and a potential Japanese bidder make AirAsia-Skymark discussions preliminary.”

AirAsia said today in an e-mailed statement that it was not planning to acquire a stake in Skymark.

“We dismiss the speculation as just another industry rumor,” the company said in the e-mail.

Bidding War

The Nikkei Asian Review earlier reported that AirAsia is considering options for aid to Skymark, citing people familiar with the situation. A bidding war is possible and an alliance with AirAsia would give the Japanese airline more bargaining power with Airbus, according to the report.

Under Japanese law, companies based outside the country may not own more than one-third of an airline.

Skymark spokeswoman Yuka Izumaru said the airline hadn’t been approached by AirAsia.

The Japanese carrier’s shares were untraded at today’s opening in Tokyo on a glut of buy orders, before rising by the daily limit of 50 yen to 230 yen.

Horton of CAPA said Skymark’s Haneda slots may be especially attractive to a Japanese bidder.

“For a potential Japanese bidder of Skymark, getting 36 Haneda slots is a huge story, even if there is another round of slot expansion next decade,” said Horton. “It is hard to see Skymark disappearing entirely. Airlines don’t die in Japan.”

To contact the reporters on this story: Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net; Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Anand Krishnamoorthy at anandk@bloomberg.net Dave McCombs


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