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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 1:14 pm

Quoting Ab345 (Reply 243):
The A330s are leased through IAP it seems.

Correct.

http://www.aviator.aero/press_releases/2261-accessdate=8

Quoting JerseyFlyer (Reply 245):
It was said a few years ago that Airbus had refused cancellation of launch orders from Thai (and MH?).

That was speculation.

[Edited 2014-07-31 06:15:35]
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par13del
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 2:02 pm

Quoting Revelation (Reply 242):
To me the only explanation that makes sense is that Airbus is trying to send a message to others who are wavering on their A380 orders.
Quoting anfromme (Reply 238):
I find this even more surprising considering the stereotype of "saving face" being very important when dealing with Japanese customers.

Well one could say that now that Airbus has broken in to the Japan market there is no need for "niceties" and business can now be business?
 
airbazar
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 2:12 pm

Quoting Tangomaniac (Reply 246):
List of Doric A380-leases:

I made the same mistake before. There are 2 "Doric" aircraft leasing companies. The one you listed is not the one that purchased 20 A380's that everyone is referring to. That "Doric" has been re-branded as Amedeu.
http://www.doric.com/ (Doric GmbH)
http://www.amedeo.aero/ (formerly Doric Lease Corp)
 
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anfromme
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 3:04 pm

Quoting par13del (Reply 251):
Well one could say that now that Airbus has broken in to the Japan market there is no need for "niceties" and business can now be business?

It was my understanding that such culture-specific rules did not just apply while you're trying to win somebody's business, but also afterwards in any dealings one has with one's Japanese customers.
Certainly the case for my own company, who has a whole dedicated team for supporting existing customers (not prospective ones) that uses very different managerial structures etc. from our other GEOs.

Quoting frigatebird (Reply 240):
I can understand Airbus couldn't agree with deferring delivery of 2 almost complete frames 6-12 months. Perhaps forcing delivery to BC with the A380s ending up in storage at VCV was not an option for Airbus either. But Skymark is still customer for A330s. How will they fix their relationship?

Skymark issued a warning today that there was uncertainty over its continued existence as a "going concern".
Source.
I have my doubts that this is solely triggered by the A380 cancellation - and I think this situation goes a long way in explaining why Airbus unilaterally terminated the contract (and why they previously suggested that Skymark slip under the wings of a larger partner). If an airline that has so far been profitable slips into the red and then immediately raises concerns about its very existence, it means something looks quite rotten and if Airbus had any sort of insight into their financing/outlook (which they probably will have had, not least because Skymark would have explained to them why they wanted to defer the first two and cancel the other four, and under what conditions) they probably had a few alarm bells going off. Deferring two half-finished A380 that are already flying for another 6-12 months for a customer that's currently on the brink doesn't sound like something Airbus (or Boeing) would be rushing to do.

Edit:
Leeham provides some additional detail:

Quote:
Today the A380 program remains a cause for concern with the forced cancellation by Airbus of its Skymark A380 contract as the airline could not arrange the financing of the airplanes. Airbus cancelled the order before two already built airframes had started cabin installations, thereby making them easier to sell to e.g. existing A380 customers.


[Edited 2014-07-31 08:14:34]
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Stitch
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 3:34 pm

Quoting anfromme (Reply 238):
Random thought, based on nothing in particular - is Airbus playing hardball to then sell those two existing frames to Skymark at different conditions?

For what purpose?


Quoting Revelation (Reply 242):
To me the only explanation that makes sense is that Airbus is trying to send a message to others who are wavering on their A380 orders.

And yet they let LH cancel three frames and have allowed QF to defer eight(?).

So if they're trying to send a message to VS (and perhaps MU), it is a mixed one...


Quoting fcogafa (Reply 239):
This can't make things comfortable between them in regards to the remaining A330s


Indeed. But I expect Airbus can more easily re-sell an A330 production slot than an A380 one...

[Edited 2014-07-31 08:40:52]
 
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Revelation
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 3:35 pm

Quoting racercoup (Reply 248):
And what message would that be? Don't let us paint your name on aircraft you're not going to end up buying?

I'm not sure. Clearly no vendor of such expensive and customized articles would be all that flexible once they had committed a large part of the time and expense in filling an order and was expecting to book the profit. However, Airbus's faxed cancellation and blunt confirmation that talks have ended are unusual if not unprecedented.

Quoting racercoup (Reply 248):
Many questioned whether this order would ever become reality, maybe Airbus waited too long to investigate the situation.

We can't say one way or the other, but we can be pretty sure the contract was clear on the stipulations of when progress payments were needed and what would happen if they weren't made.

Quoting racercoup (Reply 248):
There is plenty of egg on the face to go around here and plenty of it rests on Airbus sales department. IMHO

If they were worried about egg on the face they'd be being a lot more diplomatic, IMHO. This seems to me to be much more about euros and cents, both with respect to Skymark and with respect to others wavering on the A380.

Quoting moo (Reply 249):
So we have Skymarks version of events, but we don't have anything more yet...

It's important to point out much of the narrative is coming from the Skymark side, but we do have the statement from reply 237 above that the "decision to cancel a $2.2 billion jet order from Skymark Airlines was final".

Quoting par13del (Reply 251):
Well one could say that now that Airbus has broken in to the Japan market there is no need for "niceties" and business can now be business?

I think that would be a big mistake on Airbus's part. That is also more ammunition for the idea that Airbus trying to make a statement, because their actions are a much bigger deal in a culture where saving face is important as opposed to a "business is business" culture. As we saw above, the first story that was floated was that Skymark cancelled the order, then it was made clear by Airbus that it was them doing the cancelling. That, and their statement that the decision is final, is a slap across the face that is unmistakable to a culture where saving face is important.

Quoting anfromme (Reply 253):
If an airline that has so far been profitable slips into the red and then immediately raises concerns about its very existence, it means something looks quite rotten and if Airbus had any sort of insight into their financing/outlook (which they probably will have had, not least because Skymark would have explained to them why they wanted to defer the first two and cancel the other four, and under what conditions) they probably had a few alarm bells going off.

If Airbus had such insights earlier I imagine they would have asked for even more money up front, no?

The current outcome is just so undesirable that I think they'd take all kinds of measures to avoid it.

Quoting anfromme (Reply 253):
Deferring two half-finished A380 that are already flying for another 6-12 months for a customer that's currently on the brink doesn't sound like something Airbus (or Boeing) would be rushing to do.

They are far more than half-finished, but yes, both vendors would not want to be in this situation. What is curious to me is how Airbus has slammed the door on future talks and is positioning itself to recover even more damages rather than finding a way to work with the customer.
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mffoda
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 3:39 pm

There is a bit more on the following link, regarding the general health (not just Skymark) of the program.


http://www.columbusceo.com/content/s...ll-get-built-as-backlog-falls.html

From the article: (read more at above link)


"AIRBUS SAYS NOT ALL ORDERED A380 WILL GET BUILT AS BACKLOG FALLS"


TOULOUSE, France —"Airbus said it's closely monitoring the financial health of customers for the flagship A380 and acknowledged that not all superjumbos on order will get built after it pulled a purchase accord with a Japanese airline.

"Without referring to any specific airline, I can assure you that we have cases where airlines are in the order backlog but not in the production plan," Chief Executive Officer Tom Enders said Wednesday on a call to discuss second-quarter earnings. "We are watching the situation carefully, and know about the strengths and weaknesses of customers."

Enders sought to reassure investors who question the robustness of the A380 program, which hasn't picked up a new airline customer in two years and drew a blank at this month's Farnborough Air show. Airbus acted "proactively" in canceling the order for six double-deckers with Japan's Skymark Airlines, and the manufacturer is confident it can place the already-built planes with another customer, Enders said.

Among customers that have ordered the planes yet remain undecided about actually taking them is Virgin Atlantic, with six units on the order book. Qantas had also planned to top up its existing fleet by as many as eight A380s, an expansion that's been thrown into doubt amid a cost- cutting drive. And Amedeo, an aircraft lessor that ordered 20 A380s this year, has yet to find a single client for the jet."
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 3:43 pm

Quoting Revelation (Reply 255):
What is curious to me is how Airbus has slammed the door on future talks and is positioning itself to recover even more damages rather than finding a way to work with the customer.

I guess Airbus knows more about BC's financial situation than we do. Apparently Skymark is paying everything from their profits, so no profits == no money to pay for the whale. I guess Airbus expect more losses in Q3 and Q4 2014, meaning Skymark would not be able to take delivery of their A380s at the end of the year.

With the A330s arriving, it's just too much to take A380s at this point. According to Tony Fernandes (AirAsia CEO), it takes 12 months to break even on a brand-new A330. Now imagine if you would take an A380 during that period.
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Stitch
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 3:44 pm

Quoting mffoda (Reply 256):
There is a bit more on the following link, regarding the general health (not just Skymark) of the program.

I would not be surprised if (and personally believe that) Airbus has already refunded VS' deposits and considers that order to be cancelled.

I also am starting to believe that at least some of QF's eight remaining A380s are at risk of cancellation.

And Airbus is already on record that if necessary they will defer Amedeo's airframes if they do not have customers signed to take them rather than risk building "white tails" for them.



Quoting KarelXWB (Reply 257):
I guess Airbus knows more about BC's financial situation than we do. Apparently Skymark is paying everything from their profits, so no profits == no money to pay for the whale. I guess Airbus expect more losses in Q3 and Q4 2014, meaning Skymark would not be able to take delivery of their A380s at the end of the year.

With the A330s arriving, it's just too much to take A380s at this point. According to Tony Fernandes (AirAsia CEO), it takes 12 months to break even on a brand-new A330. Now imagine if you would take an A380 during that period.

Skymark must be in arrears on progress payments for some or all of the frames and that would give Airbus the authority to declare Skymark to be in breach of the contract and cancel it.

And that they did so makes me think Skymark is in danger of defaulting on the remainder of their A330-300 orders, as well, and Airbus may be preparing to cancel or modify that contract, as well.

[Edited 2014-07-31 08:48:35]
 
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 3:49 pm

Quoting mffoda (Reply 256):
I can assure you that we have cases where airlines are in the order backlog but not in the production plan

The Hong Kong Airlines order, for example.
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neutronstar73
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 4:07 pm

Quoting par13del (Reply 251):
Well one could say that now that Airbus has broken in to the Japan market there is no need for "niceties" and business can now be business?

That is 100% the wrong way to go about business in Japan. Trust me, Airbus doing business like this (if it is true) will hurt them in the long run. Japanese treat relationships way differently.
 
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 4:17 pm

Quoting Stitch (Reply 258):
Skymark must be in arrears on progress payments for some or all of the frames and that would give Airbus the authority to declare Skymark to be in breach of the contract and cancel it.

And that they did so makes me think Skymark is in danger of defaulting on the remainder of their A330-300 orders, as well, and Airbus may be preparing to cancel or modify that contract, as well.

Regarding the A330s, isn't it the lessor (Intrepid Aviation) who pays for those jets?
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anfromme
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 4:41 pm

Quoting Stitch (Reply 254):
For what purpose?

As I said, just a random thought  
Quoting Revelation (Reply 255):
If Airbus had such insights earlier I imagine they would have asked for even more money up front, no?

My suspicion would be that Airbus gained this insight some time after April 2014, and didn't have it at the time the order was signed. Indeed, it seems the situation was quite different then.

Quoting mffoda (Reply 256):
"Without referring to any specific airline, I can assure you that we have cases where airlines are in the order backlog but not in the production plan,"

Hmm - is he talking about the A380 here or any type in general?
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 4:47 pm

Quoting anfromme (Reply 262):
My suspicion would be that Airbus gained this insight some time after April 2014

   Soon after Skymark reported a loss in Q1 I'd imagine, and they said to Airbus "we don't have money for the next pre-payment".
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N14AZ
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 5:10 pm

Quoting frigatebird (Reply 240):
I can understand Airbus couldn't agree with deferring delivery of 2 almost complete frames 6-12 months.

They had no problem to put two QF-airframes into longterm-storage in TLS for several months after FF. They also had no problems to accept QR's deferral. Something must be different here.

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Revelation
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 5:15 pm

Quoting KarelXWB (Reply 194):
You do have a point. Still, the sheet is fully in line with the statements made by Airbus. For example, Airbus publicly said that EK's latest A380 order resolved the 2015 delivery slots. If they were lying, you would see gaps in the production list.

Something is confusing. Airbus Says Some A380s on Order May Not Be Delivered is quite current (dated Jul 30, 2014) and says:

Quote:

Airbus Chief Financial Officer Harald Wilhelm said that A380 production for this year and next has been secured, with the planemaker expecting to deliver “around 30” planes in 2105, letting it break even on the program going forward.

Airbus has been trying to get early 2016 customers to move forward to take two delivery positions at the end of 2015, though Wilhelm offered no detail about whether that process is complete. He also said there would be “no impact” on Airbus’s purchase and loss statements from the Skymark planes.

So if Airbus is trying to get 2016 customers to move forward then it seems the 2015 positions are not fully resolved, no?
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 5:17 pm

Quoting Revelation (Reply 265):
So if Airbus is trying to get 2016 customers to move forward then it seems the 2015 positions are not fully resolved, no?

CFO Harald Wilhelm literally said:

Quote:
Airbus Chief Financial Officer Harald Wilhelm said that A380 production for this year and next has been secured, with the planemaker expecting to deliver “around 30” planes in 2105, letting it break even on the program going forward.

Seems clear cut to me.

And the following quote:

Quote:
Airbus has been trying to get early 2016 customers to move forward to take two delivery positions at the end of 2015, though Wilhelm offered no detail about whether that process is complete.

Is speculation from the author.
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SANChaser
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 5:50 pm

Not sure if today's (July 31) Bloomberg article has been posted:
http://www.bloomberg.com/news/2014-0...-doubts-with-airbus-a380-fine.html

Some key points:

Quote:
Tokyo-based Skymark also said it’s considering halting unprofitable flights and borrowing money from financial institutions after its net loss more than tripled to 5.8 billion yen ($56 million) in the fiscal first quarter ended June.

The financial term used is "going-concern" which paints the company in a negative light, likely to scare any new investors. It seems they were negotiating with Airbus since April and did not come to an agreement.

Quote:
The carrier, which yesterday kept a forecast for a net income of 354 million yen this fiscal year, could face demands for as much as 70 billion yen in penalties, Kyodo News reported earlier this week, citing people familiar with the situation that it didn’t name.
 
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 5:52 pm

Quoting N14AZ (Reply 264):
They had no problem to put two QF-airframes into longterm-storage in TLS for several months after FF. They also had no problems to accept QR's deferral. Something must be different here.

Of course something is different.

Qatar Airways will eventually take their A380s. And they can pay for it. Another example: Air France, despite their bad financial shape, has a huge cash reserve. In fact, they paid cash for their latest A380s. Airbus knows these airlines can pay for their orders. Therefore, they allow deferrals.

Skymark is a different story. They don't have such large cash reserve. So without profits, they can't pay for their orders. There is no money.

As the article says, you have to evaluate the financial health of each customer.

[Edited 2014-07-31 10:58:51]
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Stitch
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 5:54 pm

Quoting KarelXWB (Reply 261):
Regarding the A330s, isn't it the lessor (Intrepid Aviation) who pays for those jets?

If Intrepid is planning to lease all seven frames to Skymark, then yes, they would be the ones paying for the jets. That being said, Airbus' decision might have Intrepid re-evaluating how likely Skymark is going to be able to make the payments on the three jets they have placed as well as the four jets they have yet to place.

[Edited 2014-07-31 11:39:04]
 
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clickhappy
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 6:03 pm

What a disaster. They could have banked all those profits instead of pissing them away on A380 dreams. The only way forward, from an investors perspective, would be to install new management.
 
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 6:07 pm

Quoting Stitch (Reply 269):
As for the Bloomberg article on 2015 delivery positions, might the two positions be ones assigned to Skymark and now that Airbus has cancelled the contract, they are available today when they were not available the day before yesterday (when Skymark's contract was still in force)?

When did CFO Harald Wilhelm made his comment? Was it not before this cancellation?

Harald Wilhelm talked about production slots. The production is secured, meaning all production slots all full in 2014 and 2015.

Two Skymark A380s have been built and the 3rd is in pre-FAL, meaning there are three unallocated delivery slots available.

[Edited 2014-07-31 11:12:37]
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clickhappy
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 6:10 pm

Quoting KarelXWB (Reply 271):
The Skymark A380s are built (the 3rd is in pre-FAL), that means there are three open delivery slots.

So there are 6 unallocated frames? 3 NTU Skymark and 3 white tails?
 
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jetfuel
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 6:13 pm

It is clearly obvious that Skymark is in serious trouble. Airbus will not just walk away. IMO Skymark will be gone

"Skymark Airlines Inc. (9204), Japan’s third-largest carrier, said it’s at risk of going out of business should it have to pay Airbus Group NV (AIR) a penalty after the planned purchase of six A380 superjumbos fell through.

There is “material uncertainty” over whether the company will remain a going concern as the airline may have to pay a “large amount” as penalty, the carrier said in a statement yesterday."

http://www.bloomberg.com/news/2014-0...-doubts-with-airbus-a380-fine.html
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 6:16 pm

Quoting clickhappy (Reply 272):
So there are 6 unallocated frames? 3 NTU Skymark and 3 white tails?

Only three, I edited my post a bit for clarification.

Quoting jetfuel (Reply 273):
It is clearly obvious that Skymark is in serious trouble. Airbus will not just walk away. IMO Skymark will be gone

It seems Skymark will have to borrow money to pay the huge penalty.

They should have borrowed money to pay the A380s in the first place, instead of using their profits.

[Edited 2014-07-31 11:17:14]
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Stitch
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 6:43 pm

So it sounds like that there is a clause in Skymark's contract that should the sales contract be terminated prior to delivery of any airframes (for whatever reasons), they would incur a 70 billion Yen cancellation fee to Airbus and I imagine that if true, this fee is what Skymark's CEO has stated is "unreasonable".
 
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 6:46 pm

Quoting Stitch (Reply 275):
they would incur a 70 billion Yen cancellation fee to Airbus and I imagine that if true, this fee is what Skymark's CEO has stated is "unreasonable".

Skymark has a cash reserve of 70 billion Yen ($70 million). So the cancellation fee represents their entire cash reserve.
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Stitch
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 6:55 pm

Quoting KarelXWB (Reply 276):
Skymark has a cash reserve of 70 billion Yen ($70 million). So the cancellation fee represents their entire cash reserve.

The Bloomberg article mention 7 billion Yen in cash reserves, so the penalty is 10 times their current savings and almost 200 times their net income for the fiscal year. The penalty is also over 3.5 times their current outstanding short-and-long-term liabilities reported in the Bloomberg article.



Quoting KarelXWB (Reply 274):
It seems Skymark will have to borrow money to pay the huge penalty.

If this 70 billion Yen penalty figure and the 7 billion Yen cash on hand and 354 million Yen annual net income figures reported by Bloomberg are correct, it will essentially force Skymark to liquidate as I cannot see how they could possibly secure that amount of money, much less pay it back even if they could.

This is probably why Airbus hinted Skymark should sell themselves to another major carrier who can take on that debt.

[Edited 2014-07-31 11:55:43]
 
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:04 pm

Quoting Stitch (Reply 277):
The Bloomberg article mention 7 billion Yen in cash reserves, so the penalty is 10 times their current savings and almost 200 times their net income for the fiscal year. The penalty is also over 3.5 times their current outstanding short-and-long-term liabilities reported in the Bloomberg article.

Sorry, I made a typo. I meant to write 7 billion Yen, converted it to 70 million Dollar and copy/pasted the wrong figure.

Quoting Stitch (Reply 277):
If this 70 billion Yen penalty figure and the 7 billion Yen cash on hand and 354 million Yen annual net income figures reported by Bloomberg are correct, it will essentially force Skymark to liquidate as I cannot see how they could possibly secure that amount of money, much less pay it back even if they could.

I have no idea how a cancellation fee works. Do they have to pay the full amount at once, or can they spread the payments?
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dtw2hyd
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:16 pm

Why would Skymark pay penalty if Airbus cancels the contract?
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StTim
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:20 pm

Airbus will have cancelled due to non performance on behalf of Skymark.

Any contract will have termination clauses. It is going badly wrong when you have to reach for the contract.
 
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:24 pm

Quoting dtw2hyd (Reply 279):
Why would Skymark pay penalty if Airbus cancels the contract?

Because Skymark committed breach of contract by 1) not meeting pre-payment deadlines and 2) trying to switch their latest A380s on order to another aircraft type.
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Stitch
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:28 pm

Quoting KarelXWB (Reply 278):
I have no idea how a cancellation fee works. Do they have to pay the full amount at once, or can they spread the payments?

I would hazard a guess it's due in full, but the actual details would be spelled out in the contract.
 
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:40 pm

Is it really in Airbus' interests to drive Skymark out of business? Surely they would have been better off negotiating a delayed entry into service rather than just keeping the deposit and bankrupting them. Now they have a bunch of half-built planes that they don't know what to do with and a small percentage of their value in deposits.
 
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Stitch
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:44 pm

Quoting peterinlisbon (Reply 283):
Is it really in Airbus' interests to drive Skymark out of business?

If Skymark is doomed to fail, anyway, better to attempt to get what they can now then after Skymark formally liquidates.

Quoting peterinlisbon (Reply 283):
Surely (Airbus) would have been better off negotiating a delayed entry into service rather than just keeping the deposit and bankrupting them.

Airbus doesn't believe Skymark will be able to pay for the planes, period, so it was not in Airbus' interests to complete the planes and then park them in the hope that Skymark would somehow be able to pay for them.

Quoting peterinlisbon (Reply 283):
Now they have a bunch of half-built planes that they don't know what to do with and a small percentage of their value in deposits.

Skymark evidently was able to pay a significant sum of monies to Airbus before they defaulted and by stopping the planes before they underwent outfitting in Skymark's customer configuration, they make it easier to attempt to re-sell them.
 
StTim
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:47 pm

They didn't just wake up one morning and decide to cancel the contract. It will have been under discussion for some time internally. They will have worked through many scenarios under the contract and looked at the possibilities for what is best for them in the long term. They will have considered what it means to not allow a Japanese company to save face - remember Fabrice worked in Japan for many years. Airbus at the end of the day have a duty to their shareholders and not to the shareholders of Skymark.
 
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:47 pm

Quoting peterinlisbon (Reply 283):
Now they have a bunch of half-built planes that they don't know what to do with and a small percentage of their value in deposits.

They already paid some $250 million deposits. That should cover the production costs of the three bare A380s.

[Edited 2014-07-31 12:48:29]
What we leave behind is not as important as how we've lived.
 
fcogafa
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 7:57 pm

This could be counter-productive on Airbus part, smaller airlines may think twice before working with them on larger aircraft
 
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Stitch
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 8:00 pm

Quoting fcogafa (Reply 287):
This could be counter-productive on Airbus part, smaller airlines may think twice before working with them on larger aircraft.


If it does anything, it will make smaller airlines think twice before placing an order for larger aircraft with either OEM.
 
StTim
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 8:01 pm

They will have played those scenarios as well.
 
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KarelXWB
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 8:03 pm

Quoting fcogafa (Reply 287):
This could be counter-productive on Airbus part, smaller airlines may think twice before working with them on larger aircraft

Cancellation fees are part of the contract, the airlines know what they are signing for.
What we leave behind is not as important as how we've lived.
 
dtw2hyd
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 8:06 pm

Quoting peterinlisbon (Reply 283):
Is it really in Airbus' interests to drive Skymark out of business?

You can say that only if Airbus pursues legal option to collect penalties. Airbus may have concluded Skymark is a lost cause and just want to move on and get a grip on A380 program. If I recall correctly Tom Enders management style is not to hang on to just hope. He will cut off any program which is not worth. I guess same rule applies to customers as well.
All posts are just opinions.
 
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Polot
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 8:30 pm

Quoting peterinlisbon (Reply 283):
Is it really in Airbus' interests to drive Skymark out of business?

At this point it probably doesn't matter to Airbus. They can't pay for the A380s they have on order, which means they will likely be struggling soon to pay the lessor for the A330s. The A330s will be easily placed, too late to do anything else with the A380s so better to just cut your losses, and Skymark has no other planes on order and no real prospects for any major future orders.

This is just a classic case of an airline biting off far more than they can chew, and waiting too late to consider alternative options (it appears, in all their grandiose plans, Skymark management never really considered what would happen if the airline became unprofitable before they received the planes, and if they could easily get financing). I think most people were just surprised that this happened now. I thought the hammer was going to fall after they received the planes.
 
racercoup
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 11:17 pm

Quoting Stitch (Reply 288):
If it does anything, it will make smaller airlines think twice before placing an order for larger aircraft with either OEM.

The manufacturer's sales department has some responsibility to gauge the quality of an order. I wonder if this order would have been taken if the model in question was selling better with delivery slots at a premium.
 
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Stitch
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RE: Airbus Cancels Skymark A380 Order

Thu Jul 31, 2014 11:34 pm

Quoting racercoup (Reply 293):
The manufacturer's sales department has some responsibility to gauge the quality of an order.

Yes they do, but at the time they placed their order Skymark was already leasing 15 737-800s and had previously operated 7 767s. And Skymark evidently made north of $250 million in deposits and progress payments towards those six A380s.

So even if Airbus took a token deposit for the frames with the possible expectation the orders would be cancelled or converted before production, once Skymark committed to production of those airframes by making the necessary payments to put those frames into production and continued to make progress payments as those frames proceeded through production, I don't see why Airbus would assume that Skymark would not continue to make those payments all the way to the final one due at delivery.

Quoting racercoup (Reply 293):
I wonder if this order would have been taken if the model in question was selling better with delivery slots at a premium.

I don't see why it wouldn't as both OEMs overbook their production lines with the assumption that there will be cancellations and deferments down the road that will allow them to re-shuffle deliveries.
 
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Miami
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RE: Airbus Cancels Skymark A380 Order

Fri Aug 01, 2014 12:00 am

Quoting fcogafa (Reply 287):

Cancellations are part of the contract they signed.
Aviation is proof that given, the will, we have the capacity to achieve the impossible. - Eddie Rickenbacker
 
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Ab345
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RE: Airbus Cancels Skymark A380 Order

Fri Aug 01, 2014 2:02 am

I think this beast of a story has taken a whole different shape as it has evolved. Some early-on customery A380bashing aside (  ) I think it's clear that BC is an airline not run in a proper way to make agressive and solid growth.

Spending only from your profits and being debt free sounds all good and I m all for it but it would better suit a local supermarket than an airline that orders 6 A380s and wants to start premium only TPAC flights with no partners and no loyalty programm.

Oh and IIRC the problems with BC started when they failed to make their April scheduled deposit
 
aryonoco
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RE: Airbus Cancels Skymark A380 Order

Fri Aug 01, 2014 6:23 am

Quoting Ab345 (Reply 296):
Spending only from your profits and being debt free sounds all good and I m all for it but it would better suit a local supermarket than an airline that orders 6 A380s and wants to start premium only TPAC flights with no partners and no loyalty programm.

Very well said. This sums it up really.

So, bringing back this discussion to who these two/three birds will go to, does anyone know when the new A380-compatible gates at IST will be constructed? If it is TK, surely they need to have those gates first before getting these planes. If itis not TK, then who?
 
TC957
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RE: Airbus Cancels Skymark A380 Order

Fri Aug 01, 2014 7:40 am

Quoting KarelXWB (Reply 274):
They should have borrowed money to pay the A380s in the first place, instead of using their profits.

The issue with that is the fall in the yen value since the order was first made, since presumably the money would come from international sources. Meaning any repayments are now about 25% more than it would have been.
 
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moo
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RE: Airbus Cancels Skymark A380 Order

Fri Aug 01, 2014 9:45 am

Quoting TC957 (Reply 298):
The issue with that is the fall in the yen value since the order was first made, since presumably the money would come from international sources. Meaning any repayments are now about 25% more than it would have been.

As the airframes would not be paid for in Yen, the same issue applies to direct payments anyway.
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