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Airbus cancels US$2.2b jet order from Japan's Skymark

Airbus on Tuesday (July 29) said it has cancelled a US$2.2 billion deal with Skymark Airlines for the purchase of six A380 superjumbos, reportedly over concerns about payment.

TOKYO: Airbus on Tuesday (July 29) said it has cancelled a US$2.2 billion deal with Skymark Airlines for the purchase of six A380 superjumbos, reportedly over concerns about payment.

The Airbus announcement came hours after Skymark said it was locked in "difficult" talks with the European aircraft manufacturer about its 2011 order, which had marked a big victory for the firm in a market long monopolised by rival Boeing. Skymark's Tokyo-listed shares plunged about 13 per cent to close at 250 yen (US$2.45) after the airline said it was negotiating with Airbus to "revise" the multi-plane order inked three years ago.

But in a statement issued after Japanese markets had closed Airbus said the deal was off. "Following discussions with Skymark Airlines, and in light of the airline's expressed intentions in respect of the A380, Airbus has in accordance with its contractual rights notified Skymark Airlines that the purchase order... has been terminated," Airbus said in a statement.

The announcement came after a French newspaper said Monday that Airbus had cancelled the contract over doubts that Skymark would be able to pay for the planes. The airline disputed the story in Les Echos, but acknowledged Tuesday that the deal was in trouble as a sharp decline in the yen since late 2012 jacked up the cost of purchasing the jets while it faced increasingly fierce competition.

The low-cost carrier claimed that Airbus threatened it with "overpriced" fees to cancel -- or slim down -- the order as it suggested the small airline be merged into a bigger carrier, which it flatly rejected. "(Airbus) said it would charge overpriced breakup fees for cancelling the purchase of A380s if our company decides to cancel," Skymark president Shinichi Nishikubo said in a statement.

The airline's president dismissed any talk of a merger with a bigger airline. "We cannot accept a demand that could hurt the independence of our company's management," Nishikubo said, adding that it would "patiently" continue talks with Airbus.

Skymark recently posted its first net loss in five years as stiff competition in the domestic market dented its books. The company, which launched in 1998, flies dozens of domestic routes with a fleet of thirty aircraft. The firm is a minnow compared with domestic giants Japan Airlines and All Nippon Airways which have long controlled the Japanese market.

However, the emergence of a handful of low-cost carriers in recent years has offered up stiff competition to the major carriers, and dented Skymark's finances.

The airline posted a net loss of 1.85 billion yen (US$18 million) in its last fiscal year, after seeing profits drop by more than half in the prior year. It reports its latest financial results on Thursday.

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