December 21, 2010 / 5:44 AM / 9 years ago

UPDATE 2-Skymark CEO predicts fleet of 50 aircraft in 4 years

* Skymark to almost triple fleet in four years

* Leased Boeing 737s to be mainstay of fleet

* Doesn’t plan share issue to finance expansion

* May buy Rolls-Royce engines despite recent problems

* Shares end up 5.8 pct after CEO’s comments (Adds details, CEO comment)

By Tim Kelly

TOKYO, Dec 21 (Reuters) - Japan’s Skymark Airlines 9204.T will almost triple its fleet to as many as 50 aircraft in the next four years made up of Boeing (BA.N) 737 jets and Airbus EAD.PA A380s, its chief said on Tuesday.

The expansion is part of a bid to turn the largely domestic discount carrier into an international airline to challenge Japan’s two big established operators Japan Airlines and All Nippon Airways (9202.T) on both long- and short-haul routes, said CEO Shinichi Nishikubo, who with a 52 percent stake is also the company’s biggest shareholder.

“The core of our fleet will be leased 737s,” Nishikubo said at a press event in Tokyo.

With two jetliner types and 50 jets Skymark would have about a quarter of the 210 aircfraft operated by nearest rival ANA, which flies six models ranging from Boeing 747s to propellor engined 56-seat Bombardier regional planes.

Skymark has no plan to issue new shares to pay for the expansion, which will also include hiring 300 cabin crew and 110 maintenance personnel, he added.

Shares of Skymark soared after Nishikubo’s comments and ended up 5.8 percent.

Skymark, which currently flies 18 737s, in November became the first Japanese airline to buy the Airbus A380. The discount carrier ordered four of the aircraft, worth $1.4 billion at list price with the option for two more, and said it may eventually operate a fleet of 15 of the superjumbos to ferry passengers to destinations in Europe and the U.S.

The company said it plans to pay cash for two of the ordered aircraft and lease the others, although he warned that any strong gain in the U.S. dollar, which would add to the yen cost of the purchase, might prompt the carrier to cancel its options.

ROLLS-ROYCE ENGINES

Nishikubo said he may pick Rolls-Royce (RR.L) engines for the aircraft despite problems that have grounded some Airbus superjumbos as long as the U.K.-based maker can say how it intends to fix the fault.

A Quantas (QAN.AX) airliner had to make an emergency landing in Singapore after one of its Rolls-Royce engines exploded mid-air, puncturing the wing. Subsequent checks on similar engines means Airbus will fail to meet a delivery target of 20 A380s this year.

Just over half of 41 A380s delivered so far have Rolls-Royce engines, on jetliners flown by Qantas, Singapore Airlines (SIAL.SI) and Lufthansa (LHAG.DE). The rest use engines built by a joint venture between General Electric (GE.N) and Pratt & Whitney (UTX.N).

Nishikubo declined to say how much he has agreed to pay for the A380s, but said that the European aircraft maker “had made a great effort on the price.”

The decision by Japan’s No.3 airline boosted a bid from Airbus to widen its 10 percent share of the Japanese market after it had failed for years to convince the nation’s two biggest carriers.

“Many people were considerably surprised by the order,” Nishikubo said, adding that he picked the big Airbus jet because it employed the latest aviation technology.

JAL, which declared bankruptcy, has never bought aircraft from the European company preferring planes from rival Boeing (BA.N), many of which are partly built in Japan by a consortium of aerospace companies including Mitsubishi Heavy Industries Ltd. (7011.T) and Kawasaki Heavy industries Ltd. (7012.T).

Designed to carry as many as 840 passengers, the double-decker A380 made its maiden flight in 2005 and entered commercial service two years later with launch customer Singapore Airlines Ltd. (Editing by Joseph Radford and Chris Gallagher)

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