TOKYO: Japan’s Skymark Airlines is filing for bankruptcy protection, reports said on Wednesday (Jan 28), as the struggling carrier faces potentially massive penalties over a cancelled US$ 2.2 billion jet order with Airbus.

The leading Nikkei business daily and public broadcaster NHK reported the bankruptcy filing, which comes less than a month after Japan’s third-biggest airline said the European aircraft maker was planning to sue it over the collapsed deal.

Calls to Skymark’s headquarters were not answered on Wednesday and the airline did not release a statement about the reported filing. The Nikkei said company executives would hold an emergency board meeting on Wednesday night before filing for bankruptcy protection with the Tokyo District Court.

Company president Shinichi Nishikubo – who flatly rejected an Airbus call to merge with a larger rival after their dispute was made public in July – was expected to resign, the Nikkei said. The carrier would continue operating for the time being, it added.

Skymark has debts topping US$ 850 million, including possible compensation costs of as much as US$ 700 million linked to the axed Airbus deal, the Nikkei said, without citing sources.

Earlier this month Japan’s Asahi newspaper said talks about rival All Nippon Airways (ANA) investing in Skymark had fallen apart, and that the loss-making carrier would try to climb out of the red on its own. Skymark rejected that report but said it was talking with ANA and Japan Airlines about code-sharing, as well as with domestic and overseas funds over a possible investment deal.

The carrier has struggled because of fierce competition in the airline sector, and its woes deepened after the Airbus affair made headlines last summer. Skymark’s Tokyo-listed shares lost about half their value after Airbus cancelled the order for six A380 jets, signed in 2011, apparently over concerns it would not get paid.

At the time Skymark accused Airbus of threatening it with “overpriced” penalties.

Skymark, which has about 2,200 employees, was born out of deregulation measures in the 1990s that were aimed at challenging ANA and JAL’s control of the market. It operates domestic flights in and out of Haneda Airport just a short train ride from central Tokyo.