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Airbus terminates sale of six A380 superjumbos to Japan's Skymark

A model of an A380 Airbus with its evacuation slides deployed is displayed in the lobby at UTC Aerospace Systems in Phoenix, Arizona, July 11, 2014. REUTERS/Nancy Wiechec

TOKYO (Reuters) - Airbus Group NV (AIR.PA) said on Tuesday it has terminated an agreement to deliver six A380 superjumbo jets to Skymark Airlines Inc <9204.T> after the Japanese discount carrier struggled to raise enough cash to pay instalments on the aircraft.

In a briefing in Tokyo before Airbus's announcement, Skymark's CEO and chief investor, Shinichi Nishikubo, said that the European aircraft maker had refused to consider changes to the 2011 purchase agreement, including reducing the number of aircraft or offering smaller jets and had notified it of the termination in a faxed message on Sunday.

"We didn't get the chance to sit down and have a formal discussion," Nishikubo said.

The termination marks a setback for Airbus in Japan after it won its first order ever from Japan Airlines <9201.T> (JAL) last year which agreed to buy more than 30 A350 jets.

The European company has struggled to win market share from rival Boeing Co (BA.N) which dominates with around an 80 percent market share helped by strong ties to local aircraft makers like Mitsubishi Heavy Industries <7011.T>, which make major portions of its jetliners.

Losses incurred at Skymark as it grapples to win market share from Japan's two dominant carriers, ANA Holdings <9202.T> and JAL, meant it was unable to convince lenders to finance the purchase of the six A380s. It had planned to use them for a discount business-class only international flights.

Skymark is unlikely to recover 26 billion yen (150 million pounds) in instalments it has already paid to Airbus, Nishikubo said. He plans to hold talks with Airbus regarding cancellation fees, he added.

The Skymark cancellation means that no Japanese carrier will now fly the A380. Both JAL and ANA have said they are not interested in buying the largest class of passenger aircraft.

Orders for the A380 are hanging in the balance elsewhere, according to aerospace sources, including 10 aircraft earmarked for Hong Kong Airlines.

Reuters reported this month the Hong Kong carrier no longer wanted the jets after an associated leasing company struck an expanded deal to buy 70 smaller A320-family aircraft.

Since March the order has not been attributed to Hong Kong Airlines, but to an "undisclosed" customer, raising questions over its status, according to a review of Airbus data.

Officials for the aircraft maker said at the Farnborough Airshow this month that the Hong Kong order remained on its order book.

The four-engine, double-decker A380, which is listed at $350 million, was launched in 2000 as a solution to Europe's congested airports and as a rival to Boeing's 747.

But growing demand for large twin-engine jets has sapped demand, while sales have also been hurt by technical problems and the financial crisis, during which many airlines avoided large-scale purchases.



(Reporting by Tim Kelly; Editing by Edwina Gibbs and Matt Driskill)