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Japan's Skymark to raise $36m from DBJ, ANA and other shareholders

Struggling budget carrier will also get support from investment fund Integral

Discount carrier Skymark Airlines, like others in Japan is struggling to stay afloat amid a collapse in travel demand brought on by the COVID-19 pandemic.   © Kyodo

TOKYO -- Japanese budget carrier Skymark Airlines is preparing to raise 4 billion yen ($36 million) from shareholders, Nikkei has learned, as it aims to strengthen its finances and recover from the impact of the coronavirus pandemic.

The company will raise capital from investment fund Integral and the government-backed Development Bank of Japan, as well as ANA Holdings, all of which hold a stake in the carrier.

As early as August, Skymark will raise 2 billion yen through a shareholder allocation, and another 2 billion yen in subordinated loans. It appears that the subordinated loans, which will be financed by the DBJ, will be fully recognized as equity for rating purposes.

Integral, which is Skymark's largest shareholder, with a stake of 50.1%, is expected to underwrite about 1 billion yen while a fund created by DBJ and Sumitomo Mitsui Banking Corp. will be responsible for about 670 million yen. ANA will underwrite about 330 million yen.

SMBC and Mizuho Bank have lent Skymark 30 billion yen in syndicated loans. The loans are due at the end of July but the banks have agreed to refinance.

The move by the discount airline comes amid a sharp fall in air travel due to the pandemic, with various airlines struggling to keep afloat. Many have pushed to recapitalize and raise funds, including ANA and Japan Airlines.

ANA and JAL have already raised funds through public offerings, while younger budget carriers like Star Flyer have issued new shares through third-party allotments. Regional airlines Airdo and Solaseed Air, which plan to merge in 2022, have issued preferred shares through a third-party allotment to the DBJ.

Skymark's earnings have suffered due to COVID-19. For the year through this past March, the company posted a net loss of 16.3 billion yen, while its capital adequacy ratio deteriorated from 30% to 12% in a year. In June, the number of airline passengers totaled about 250,000, down around 60% from June 2019.

Recovery in travel and tourism has been slow, especially as Japan struggles to contain the spread of the delta variant and the number of new infections increases in big cities like Tokyo. The shift to teleworking has also dampened demand for business travel.

Major airlines like ANA and JAL are also trying to capture tourism demand, including through initiatives carried out by their low-cost carriers, which will likely heat up competition with newer, emerging airlines.

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