Channel NewsAsia

Airbus confirms decision to cancel jet order from Skymark Airlines

Airbus on Thursday said its decision to cancel a $2.2 billion jet order from Skymark Airlines was final, rejecting the Japanese carrier's suggestion that talks were still ongoing.

TOKYO: Airbus on Thursday (July 31) said its decision to cancel a $2.2 billion jet order from Skymark Airlines was final, rejecting the Japanese carrier's suggestion that talks were still ongoing.

The European aircraft maker said this week it had informed Skymark that its purchase of six A380 superjumbos "has been terminated", just hours after the airline said it was still locked in tough negotiations over the order. Skymark's Tokyo-listed shares plunged in the wake of Airbus announcement, wiping out a quarter of its market value in just two sessions.

"We will not talk about the issue of the shipment anymore, as we have cancelled the order," a spokesman for the European firm's Tokyo unit told AFP on Thursday. He added that Airbus would now be working on a compensation deal over the failed deal, which was inked three years ago.

The carrier's shares were down another 1.85 per cent to 212 yen in Tokyo morning trade. Skymark, which reports its latest financial results later on Thursday, had on Tuesday (July 29) acknowledged 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 carrier said Airbus had 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.

Skymark has posted its first net loss in five years as stiff competition in the domestic market dented its books. The company, which was launched in 1998 in a bid to offer more choice in a market long controlled by Japan Airlines and All Nippon Airways, flies dozens of domestic routes with a fleet of thirty aircraft.

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 ($18 million) in its last fiscal year, after seeing profits drop by more than half in the prior year.

Tweet photos, videos and updates on this story to  @channelnewsasia