Here's Why Investors Find This Japanese Airline So Irresistible

Skymark, Japan’s third largest airline, saw its stock skyrocket to a six-year high this week on the Nikkei Index amid rumours of a potential takeover by Malaysian low-cost giant AirAsia.

Closing at 230 Yen a share on Tuesday, Skymark’s shares have spiked 28% this week, Bloomberg reported.

That’s welcome news to an airline that has struggled to find its long-term financial footing of late. In fact, Airbus Industries cancelled Skymark’s order for six A380 superjumbos last month due to concerns over the airline’s ability to pay for the aircraft.

The takeover rumours emerged after AirAsia announced its partnership with Japanese e-commerce firm Rakuten Inc. to setup a new airline in the country.

The stock remained popular even after AirAsia CEO Tony Fernandes issued this denial on Twitter:

What makes an airline that’s lost $US57 million in the last quarter so valuable to potential investors?

According to the Nikkei, Skymark’s value arises from its access to lucrative routes that fly in and out of Tokyo’s Haneda Airport.

Tokyo Haneda International AirportREUTERS/Kyodo KyodoThe International Terminal at Tokyo Haneda International Airport

“To get slots, [AirAsia] would have to wait in line for allocations or acquire a stake in an existing airline,” Timothy Ross, a Singapore-based analyst at Credit Suisse Group AG, told Businessweek.

With flights out of the Japanese capital being the most profitable in the country, Skymark’s 36 slots are incredibly important assets to any airline looking to expand operations in the Japan. The Nikkei reports that a single slot at Haneda can generate as much as $US19.3 million a year in revenue for an airline.

However, even if AirAsia doesn’t complete the rumoured takeover, local Japanese investors may be willing to pay big bucks for Skymark.

AirAsia CEO Tony Fernandes REUTERS/Romeo RanocoAirAsia CEO Tony Fernandes poses in front of an AirAsia Airbus A320

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