A380s HAVE BEEN ORDERED BY A LOW COST CARRIER

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By TESTCustomwebLP TESTCustomwebLP November 9, 2010 21:06

A380s HAVE BEEN ORDERED BY A LOW COST CARRIER

You may recall that two years ago this news team stated that the Japanese domestic LCCs were looking to order A380s, that plan was delayed by the global banking crisis but now Skymark Airlines, Japan’s biggest low-cost carrier, is to order four A380s, with an option to buy two more. The airline intends to operate the aircraft on new international routes in three years and hopes to be the first low cost carrier to offer reasonable prices for long-haul flights.

Skymark currently only operates a domestic network. Many of you reading this will wonder how an A380 will fit into a low cost model with a fleet of 15 737s. That fact has not been lost on the markets who have sent shares lower by the most in five years in Tokyo trading as some analysts said its plan to buy four A380s and begin international services raised risk. Shares tumbled by as much as 16% to 793 yen, the biggest intraday drop since March 2005. It was down 15% at 802 yen at the 11 am trading break.

On the face of it this is a damning show of force by investors, but we must take into account the recent trading background. The shares have more than doubled this year, compared with a 13% decline for the Tokyo Stock Exchange Mothers Index. It is highly likely that the recent troubles with the A380 are playing on the minds of investors along with the huge amount of debt that the airline will need to carry in order to fund the A380 purchase. Then there are worries about pilots, fuel and maintenance as the aircraft are in no way a fit with the current fleet. Also a four engined aircraft in a low cost model is a new prospect.

The board of Skymark are no mugs. I think we can credit them with having thought all of the problems with regard to the A380 purchase through long and hard. Three years ago this team mentioned that the A380 is a good option for an LCC so long it racks and stacks passengers and runs the aircraft on routes where it can fill the A380 with 800 passengers. Such a model means insurance companies will be tested by Skymark’s ambitions. One thing is for sure, ANA will be put under massive competition on seat prices on some routes from 2014 and no one can question the preference of the Japanese public to be flying on the most up-to-date aircraft at all times.

It is a gamble that could well work and show the way forward. Other low cost long haul carriers filled their aircraft but could not turn a profit; this indicates that to win out in the low-cost, long-haul market you need the A380!

Skymark, which started service in 1998, plans to begin flying the A380s in the fiscal year starting April 2014. The four-plane order is worth $1.9 billion at list prices.

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By TESTCustomwebLP TESTCustomwebLP November 9, 2010 21:06
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