[TOKYO] Shares in Japan's Skymark Airlines lost a quarter of their value on Thursday morning after the struggling carrier filed for bankruptcy protection, citing potentially crippling penalties over a cancelled US$2.2 billion jet order with Airbus.
The embattled shares dropped 25 percent to 237 yen (US$2) - their daily loss limit - at the open, but trading sputtered as sell orders vastly outnumbered buy bids.
Investors were reacting to news late Wednesday that Japan's third-largest airline would file for bankruptcy as it acknowledged efforts to turn itself around had failed.
"The company came to the conclusion that it will be extremely difficult to rehabilitate itself on its own," Skymark said in a statement, citing "unreasonable" breach-of-contract penalties.
Company executives held an emergency board meeting Wednesday evening before filing for protection with the Tokyo District Court.
President Shinichi Nishikubo - who rejected an Airbus call to merge with a larger rival after their dispute was made public in July - also resigned on Wednesday.
The airline will continue operating for the time being, but its shares would be delisted from March 1, according to the Tokyo Stock Exchange.
Skymark said it has debts topping US$603 million and faces possible compensation costs of as much as US$700 million linked to the axed Airbus deal.
The airline is in talks with Airbus to reduce the size of the penalty, after earlier saying that the European plane maker was preparing a lawsuit over the dispute.
Skymark has struggled because of fierce competition in the airline sector, and its woes deepened after the Airbus affair made headlines last summer.
Its shares lost about half their value in the wake of Airbus cancelling the order for six A380 jets, signed in 2011, apparently over concerns it would not get paid.
Skymark, which has about 2,200 employees, was born out of deregulation measures in the 1990s that were aimed at challenging rival All Nippon Airways and Japan Airlines' (JAL) control of the market.
It operates domestic flights in and out of Haneda Airport, just a short train ride from central Tokyo.
JAL received a government bailout after it went bankrupt in 2010. The country's flagship carrier re-listed on the Tokyo bourse in 2012 after an US$8.5 billion share sale.