Skymark Airlines Inc., Japan’s largest discount carrier, will return to profit next fiscal year as it hands back the final two Boeing Co. 767 planes in its fleet, reducing costs related with returning the aircraft.
The airline expects net income of about 2.6 billion yen ($28 million) in the year starting April 1, the same as last business year, President Shinichi Nishikubo said in a Dec. 2 interview in Tokyo. That compares with a forecast loss of 2.1 billion yen this fiscal year.
Costs for returning the leased planes will drop 74 percent to 900 million yen, from 3.5 billion yen this fiscal year, Nishikubo said. Skymark is converting its fleet to smaller Boeing 737s to cut seating capacity and reduce maintenance costs by using a single, more fuel-efficient aircraft type.
“It’s reasonable to imagine Skymark could return its profit to last fiscal year’s level,” said Satoshi Yuzaki, a manager at Takagi Securities Co. “The costs involved in returning airplanes are fairly clear.”
Skymark will return its last 270-seat plane in November completing the conversion of its fleet to 177-seat planes. The airline has lost money in two of the past three years as higher fuel prices hurt its profitability. The airline, which doesn’t hedge its fuel costs, will benefit from a decline in jet kerosene expenses and a strengthening of the yen.
Jet kerosene, the carrier’s biggest operating cost, has more than halved to $58.25 a barrel in Singapore on Dec. 5, compared with a record high of $181.85 a barrel in July.
“We can ensure a profit of 2.6 billion yen next fiscal year,” Nishikubo said.
A rally in the yen against the dollar will also help reduce costs for fuel, foreign pilots and aircraft lease payments, which it pays in dollars.
The yen has gained 21 percent against the dollar this year, rallying to a more than 13-year high of 90.93 in October.
“The stronger yen is a significant plus for us,” Nishikubo said. Skymark will save about 60 million yen in fuel costs for a 15 yen gain against the dollar, he said.
Skymark rivals Japan Airlines Corp. and All Nippon Airways Co. are paying more for fuel this quarter because of wrong-way bets on fuel prices. All three face dwindling passenger numbers as a recession in Japan curbs demand for air travel.
The discount-carrier is unlikely to have higher sales next fiscal year, Nishikubo said. Skymark’s sales will be 43 billion yen this fiscal year, it forecasts.
The airline carried fewer passengers for an eighth month in October as economic growth slowed and it had to cancel 633 flights in the three months to August due to a shortage of pilots. It is operating flights regularly this quarter, it said.
“The drop in oil prices is a bigger positive than the negative effects of a slowing economy,” Nishikubo said.
The carrier aims to boost its fleet to 11 aircraft by the end of this fiscal year to expand its destinations from Tokyo.
Skymark, which currently operates five routes in Japan with 10 planes, may add a new service to either Kumamoto or Nagasaki in Kyushu, as well as Komatsu airport in Ishikawa prefecture from Tokyo’s Haneda airport, Nishimatsu said.
The airline rose 0.9 percent to close at 109 yen on the Tokyo Stock Exchange today. The stock has tumbled 57 percent this year, compared with a 17 percent decline at All Nippon and a 16 percent drop at Japan Airlines.