Skymark Airlines Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥54.88B
• Operating Income: ¥1.21B
• Net Income: ¥475M
• EPS: ¥7.89

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Skymark (TSE: 92040) reported FY2026 Q2 single-entity JGAAP results with modest top-line growth but sharp profit compression, highlighting cost pressure and operating leverage in the airline business. Revenue rose 0.7% year over year to ¥54.9bn, while operating income fell 47.8% to ¥1.21bn, implying significant mix or cost headwinds despite stable demand. Ordinary income was ¥0.49bn and net income ¥0.48bn, the latter down 95.3% YoY, suggesting large non-operating or extraordinary swings in the prior-year base and/or current period. EBITDA was ¥2.65bn (4.8% margin), indicating limited buffer after fixed costs in a capital- and lease-intensive model. DuPont shows ROE of 1.73% driven by thin net margin of 0.87%, moderate asset turnover of 0.509x, and high financial leverage of 3.93x. Interest coverage is 4.8x based on operating income versus interest expense of ¥0.26bn, adequate but not comfortable given earnings volatility. Operating cash flow of ¥3.82bn was strong relative to net income (OCF/NI ≈ 8.0x), indicating positive cash conversion from non-cash expenses and working capital dynamics typical of airlines (e.g., advance ticket sales). However, free cash flow cannot be robustly assessed because investing cash flows are unreported in this dataset; the displayed FCF of 0 reflects missing information rather than actual zero capex. On the balance sheet, total assets are ¥107.7bn and total equity ¥27.4bn; this implies an equity-to-asset ratio around the mid‑20s percent even though the “Equity Ratio” field shows 0.0% (unreported). Current liabilities of ¥49.9bn exceed current assets of ¥39.4bn, resulting in a current ratio of 79% and negative working capital of ¥10.5bn, which is common in airlines but still a liquidity consideration. Debt-to-equity is 2.80x, consistent with the high leverage reflected in DuPont. Dividend per share is reported at ¥0.00 with a payout ratio of 0%, aligning with a conservative cash stance amid profit volatility and fleet financing needs. Reported EPS is ¥7.89, but share count is unreported, limiting per-share trend analysis; the EPS nonetheless corroborates the sharp YoY profit decline. The combination of flat revenue and steep operating profit decline points to cost inflation (fuel, maintenance, leases, labor) outpacing fare/pricing and load-factor gains. Cash generation from operations is a relative positive, but visibility on capex/lease-related investing cash flows is limited in this release. Overall, profitability is subdued, leverage is meaningful, and near-term focus appears to be on cost control, yield management, and sustaining liquidity. Data limitations (several unreported items) constrain certain conclusions, so monitoring subsequent disclosures (particularly cash, capex/lease payments, and extraordinary items) is important.

Profitability Analysis

ROE is 1.73%, decomposed as Net Profit Margin 0.87% × Asset Turnover 0.509 × Financial Leverage 3.93. The thin margin is the primary drag, with leverage providing most of the ROE uplift. Operating income of ¥1.21bn on ¥54.88bn revenue implies an operating margin of roughly 2.2%, down markedly YoY given the 47.8% decline in operating profit against near-flat sales. EBITDA of ¥2.65bn (4.8% margin) indicates limited cushion for interest, leases, and maintenance costs; interest coverage is 4.8x (EBIT vs. interest expense of ¥0.26bn). The negative operating leverage (OP falling much more than revenue) points to rising unit costs (fuel, labor, maintenance) and/or weaker yields or load factors; airline fixed costs and lease structures amplify small demand or pricing shifts. Ordinary income (¥0.49bn) trails operating income by ~¥0.72bn after interest and other non-operating items, further compressing net profitability. The reported effective tax rate metric is 0.0% in the provided calculations, but the income tax line is ¥0.69bn; given the mismatch with ordinary income, extraordinary items and JGAAP classifications likely affected tax recognition—interpret with caution. Overall margin quality is modest and sensitive to cost inputs and pricing discipline.

Growth Assessment

Revenue grew 0.7% YoY to ¥54.9bn, suggesting stable passenger demand or capacity, but insufficient pricing/yield improvement to offset cost pressures. Operating income declined 47.8% YoY, demonstrating negative operating leverage and potential inflation in key inputs (fuel and FX-driven USD costs) or increased maintenance/lease burdens. Net income fell 95.3% YoY to ¥0.48bn, implying large non-operating/extraordinary swings versus the prior-year base in addition to weaker operations. With EBITDA margin at 4.8% and OP margin ~2.2%, earnings quality is vulnerable to exogenous shocks (fuel/FX/ATC fees) and internal execution (load factor, CASK management). Asset turnover at 0.509x is consistent with a capital-intensive airline with moderate fleet utilization; improving utilization and mix could support top-line productivity. Near-term outlook hinges on yield management, capacity discipline, and cost normalization; incremental revenue growth without cost relief is unlikely to translate into profit growth given current margin structure. Seasonal tailwinds and holiday travel could support 2H revenue, but visibility is limited, and forward bookings/yield data are not provided. Absent explicit guidance, assume cautious growth with focus on restoring OP margin rather than chasing volume at low yields.

Financial Health

Total assets ¥107.7bn, total liabilities ¥76.8bn, and total equity ¥27.4bn indicate a leverage-heavy capital structure typical for airlines. Implied equity ratio is roughly mid‑20s% based on assets and equity, though the reported equity ratio field is unreported in this dataset. Debt-to-equity is 2.80x and financial leverage (assets/equity) is 3.93x, underscoring sensitivity to earnings swings. Current ratio is 79% with negative working capital of ¥10.5bn (current assets ¥39.4bn vs. current liabilities ¥49.9bn); while advance ticket sales structurally depress working capital in airlines, this still requires careful liquidity management. Interest expense is ¥0.26bn versus EBIT ¥1.21bn, giving 4.8x coverage; this is acceptable but could erode quickly if operating profits weaken further. Cash and equivalents are unreported here, so immediate liquidity buffers and net debt cannot be assessed from this dataset. No information on off-balance operating leases is provided; however, lease obligations are typically material and should be incorporated when available. Overall solvency appears adequate but reliant on stable cash generation and access to financing.

Cash Flow Quality

Operating cash flow of ¥3.82bn versus net income of ¥0.48bn yields an OCF/NI ratio of ~8.0x, indicating strong cash conversion driven by non-cash charges (e.g., ¥1.44bn D&A) and likely favorable working capital (advance receipts). Investing cash flow is shown as 0 (unreported), so free cash flow cannot be reliably computed; the displayed FCF of 0 reflects missing data rather than a true absence of investment. Financing cash flow of -¥2.13bn indicates net outflows (debt repayment, lease-related payments, or other financing), consistent with deleveraging or scheduled amortization. Without cash and equivalents disclosure, we cannot assess period-end liquidity or net cash/debt. Earnings quality appears better on a cash basis than on an accrual basis this quarter, but sustainability depends on the persistence of advance ticket cash inflows and future capex/lease payments for fleet. Working capital dynamics are structurally favorable in airlines but can reverse with demand shocks; monitoring deferred revenue and ticket liability balances is key.

Dividend Sustainability

DPS is reported at ¥0.00 with a payout ratio of 0%, consistent with conserving cash amid volatile earnings and moderate leverage. Given unreported investing cash flows and cash balance, FCF coverage of dividends cannot be meaningfully assessed (the 0.00x figure reflects data gaps). With net income of ¥0.48bn and operating cash generation positive, the company could prioritize balance sheet resilience and fleet commitments over distributions. Absent a stated policy in this dataset, the near-term outlook suggests continued prudence on dividends until profitability stabilizes and visibility on capex/lease cash needs improves.

Risk Assessment

Business Risks:

• Fuel price volatility impacting unit costs and margins
• Foreign exchange risk (USD exposure for fuel, leases, maintenance)
• Yield and load factor sensitivity due to competition and demand swings
• Airport slot and network constraints (particularly at key hubs)
• Operational disruptions (weather, ATC, pandemics) affecting revenue and costs
• Maintenance and safety compliance costs
• Environmental regulation and potential carbon cost escalation

Financial Risks:

• High leverage (D/E 2.80x; financial leverage 3.93x) amplifying earnings volatility
• Sub-1.0x current ratio (79%) and negative working capital requiring tight liquidity management
• Interest coverage of 4.8x susceptible to further EBIT pressure
• Limited visibility on cash balances and capex/lease outflows due to unreported CF items
• Refinancing and covenant risks typical for airline financing structures

Key Concerns:

• Sharp YoY contraction in operating and net income despite flat revenue
• Thin margins (EBITDA 4.8%, OP ~2.2%) offering limited shock absorption
• Dependence on cost normalization and yield improvement to restore profitability
• Data limitations (cash, investing CF, equity ratio field) obscuring liquidity and FCF

Investment Implications

Key Takeaways:

• Top-line essentially flat (+0.7% YoY) but operating income down 47.8%, evidencing negative operating leverage
• ROE of 1.73% constrained by a 0.87% net margin despite high financial leverage
• Adequate but tightening interest cover (4.8x) amid modest EBITDA margin of 4.8%
• OCF stronger than accrual earnings (OCF/NI ~8x), though FCF cannot be assessed due to unreported investing CF
• Liquidity requires monitoring: current ratio 79%, working capital -¥10.5bn
• Equity base of ¥27.4bn suggests an implied equity ratio in the mid‑20s% range, despite the unreported field

Metrics to Watch:

• Passenger yield and load factor (RASK vs. CASK, CASK ex-fuel)
• Fuel prices and USD/JPY, and any hedging disclosures
• Operating income margin recovery and EBITDA/interest coverage
• Operating cash flow sustainability and disclosure of capex/lease payments
• Deferred revenue/ticket liabilities and other working capital trends
• Leverage metrics including net debt/EBITDA once cash is disclosed

Relative Positioning: Within Japanese airlines, Skymark’s results depict tighter margins and higher sensitivity to cost pressures versus revenue, with leverage and liquidity metrics that are typical for the sector but leave less room for execution error absent clear yield gains or cost relief.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis