Airbus to sue Skymark in UK court over cancelled A380 contract

By Thomas Wilson

TOKYO (Reuters) - European aircraft maker Airbus Group NV is suing Skymark Airlines Inc in Britain, escalating a half-year spat over a cancelled jet order and complicating the efforts of Japan's third-biggest carrier to rebuild its finances.

The world's second-largest planemaker "has filed a claim in the English court," said Tokyo-based Airbus spokeswoman Utako Fujiso. She declined to comment further on the case.

Skymark understands that "Airbus is beginning preparations for litigation regarding a penalty for breach of contract," said Skymark spokesman Hiroyuki Sakata. "Discussions with Airbus towards the resolution of this problem are proceeding and will continue to do so."

Airbus cancelled a $2 billion contract with Skymark for six A380 superjumbo passenger jets in July after the carrier struggled to raise cash to pay the instalments.

Skymark's stock plunged 17 percent on Monday to 316 yen on news of the lawsuit, the biggest drop among shares on the first section of the Tokyo Stock Exchange.

The fall undid much of a more-than tripling of the share price since mid-August. The stock peaked at a one-year high of 520 yen on Thursday on news that Skymark is in talks with four investment funds to sell a less-than 25 percent stake in the carrier early next year. It has also been seeking code-share deals with ANA Holdings Inc and Japan Airlines Co Ltd (JAL).

Airbus's legal claim against the only Japanese buyer of the A380 is a setback for Skymark's attempts to reverse its fortunes.

Established in 1998, Skymark has been Japan's most successful budget carrier to date, and was a rare example of a small airline surviving without affiliation with either ANA or JAL. But tough competition from the country's dominant carriers saw Skymark incur losses that left it unable to finance the purchase of the A380s.

Skymark forecasts a net loss of 13.7 billion yen ($114.6 million) for the financial year ending March.

For Airbus, the cancellation of the contract was a blow in its efforts to sell the A380, the world's largest airliner. A fortnight ago the planemaker predicted flat profit for 2016, surprising investors who had expected new and recently upgraded models to boost results.

The forecast came on the back of flat sales of the A380, as aggressive marketing struggled to overcome airlines' preference for lighter, twin-engine models.

($1 = 119.5200 yen)

(Editing by William Mallard)