Jul 30, 2014

Airbus, Skymark cancel contract on six A380s

Airbus disclosed on July 29 that it has notified Skymark Airlines (SKY) that it has terminated the sale/purchase agreement (SPA) for six Airbus A380 aircrafts that was concluded between them in February 2011. Citing its deteriorating business performance in recent years resulting from the state of low yen in the market and the severe business environment caused by the intensifying competition, and claiming that, "We have to change our initial plans," SKY has been engaged in much consultation with Airbus on the review of their SPA since April this year.

The first A380 aircraft for SKY has already completed its maiden flight. Airbus claimed that, "We plan to exercise all our rights and remedies in accordance with the contract." Meanwhile, SKY is projected to sustain a hefty penalty from the termination of the deal. The list price of the A380-800 aircraft stood at $414.4 million (around Y42.3 billion) as of 2014.

Talks between the two companies concerning the cancellation of the order for six A380 aircrafts for SKY proceeded with great difficulty. According to SKY, by the time it asked to change the contract, Airbus required it to join a larger airline group as a part of the conditions of contract revision and demanded exorbitant breakup fees that defy common practice if SKY decides to cancel the purchase of the A380s. In response, SKY stressed that, "We cannot accept such a demand that would shake our company's management independence."

The maiden flight of the first A380 bound for SKY was completed in April this year. Such aircraft was initially scheduled to be delivered between the end of this year and January next year, but its delivery was projected to be delayed by about half a year as of June owing to changes in the specifications of its interiors.

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