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Skybus Airlines

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Skybus Airlines
IATA ICAO Call sign
SX SKB SKYBUS
Founded2004
HubsPort Columbus International Airport
Focus citiesPiedmont Triad International Airport
Fleet size7 (65 firm orders)
Destinations16
Parent companySkybus Airlines, Inc.
HeadquartersColumbus, Ohio
Key peopleBill Diffenderffer (CEO)
Kenneth L. Gile
(President & COO)
Charlie Clifton
(Board of Managers)
Mike Hodge
(CFO)
Websitehttp://www.skybus.com

Skybus Airlines is a privately held airline (with plans to go public by 2009) based in Columbus, Ohio, USA. It is an ultra-low-cost carrier, modeled after the European airline Ryanair and the early years of Southwest Airlines. Skybus's business model aims to be the least expensive airline in the United States, with fares up to 25% less than Southwest. Their model is heavily reliant on opening new markets as Ryanair has done in Europe thus keeping competition to a minimum. The business model also includes advertising on the interior and exterior of its aircraft as well as selling merchandise onboard to increase revenue.

In January 2005, Skybus filed a proposal to the United States Department of Transportation to start operations from Port Columbus International Airport[1] and received approval on March 15, 2006.[2] The airline received FAA certification on May 10, 2007,[3] though it was granted a waiver that allowed them to begin ticket sales on April 24th.[4] The first flights out of Columbus began on May 22 2007.

History

What was to become Skybus was initially founded in the late 1990s by John Weikle and Ken Gile the former Director of Operations for Southwest Airlines. This early venture went by the name of Heartland Airlines and planned to operate Boeing 717s out of Dayton, Ohio. Working with JP Morgan, the airline almost reached startup, but failed to raise the necessary capital and was eventually abandoned.[5] Years later, the concept was resurrected, this time under the name of "Skybus Airlines". Taking advantage of America West Airlines pulling out as a hub of Columbus, they started gathering capital to start the airline in that city.[6]

Destinations and prices

File:Skybus waiting area.jpg
Waiting area under Concourse B on the ground level at Port Columbus. Skybus passengers embark and disembark directly from the apron instead of using a jetway.

On April 24, 2007, Skybus Airlines announced their initial set of eight destinations, all of which originate from their hub at Port Columbus International Airport in Columbus. At first Skybus operated a strict hub-and-spoke service denying the ability to book round-trip flights between destination cities that were not Columbus, but the company recently announced it would begin flying direct flights from its Portsmouth destination to two locations in Florida. In addition, prices of tickets and details on extra fees were announced the same day. The low fares come at a price. There are charges for checking bags and for preferred seating. The airline also shuns jetways, using ground-level-boarding ramps and airstairs instead.

On July 24, 2007, the U.S. Department of Transportation granted Skybus the right to fly international flights to Cancún, Mexico and Nassau, Bahamas.[7]


Skybus announced on September 25, 2007 that it would begin daily service from Portsmouth to St. Augustine, as well as Fort Myers, served by Punta Gorda airport in December of 2007.[8]

As of Oct. 25, 2007 all press releases and references to the international service have been removed from the Skybus website.

Destinations

Main article: Skybus Airlines destinations

Currently, Skybus provides service to 12 destinations throughout the United States. Skybus began its innaugural flight on May 22, 2007, when the airline began flights from their Port Columbus hub. Beginning December 5, 2007, Skybus will begin service to Chattanooga, Tennessee, Gulfport/Biloxi, Mississippi, Milwaukee, Wisconsin, and Punta Gorda, Florida, which will bring the airline's operations to 16 total cities and 15 destinations served from their Columbus hub.[9][10][11] The first service that does not include its Columbus hub will begin December 17, 2007, when Skybus begins flights between Portsmouth and St. Augustine as well as Punta Gorda, Florida. [12]

On October 16, 2007, Skybus announced it was eliminating service to San Diego, Bellingham, and cut one flight a day to Burbank. The cuts were made for rising fuel costs as it was more cost effective to use their current fleet on shorter and more profitable runs. Service to San Diego is expected to resume once the airline obtains more aircraft. At the same time, Skybus said it would add a second daily flight to Greensboro, North Carolina, now their 2nd focus city, and a third daily flight to Punta Gorda, Florida. Announced on November 1, 2007, Skybus will initiate service to Newburgh, New York on January 6, 2008. These upcoming schedule changes will decrease Skybus' destination count to 15.[13]

On October 22, 2007, Skybus announced the opening of a new focus city at Piedmont Triad International Airport in Greensboro, North Carolina. [14]

Fares

Advertised fares to all current target cities will begin at $10 one-way, although the price increases as more tickets are sold for that flight. Though the exact number of $10 tickets are not advertised, Skybus guarantees that a minimum of ten such tickets will be offered for each flight. Ticket prices for the remaining fares is expected to be around half the price of other airlines. These fares do not include taxes and other airport fees, however, which add around $10 to a one-way ticket. All fees included, the cheapest round-trip ticket for one adult will cost approximately $40.[15]

Extra fees

In order to keep fares low, Skybus charges extra for almost everything other than the ticket itself. This is actually quite common in the airline industry today with many airlines like Spirit doing similarly with regards to baggage and food. America West Airlines (now US Airways) began charging for food in coach 3 years ago and has had success with this method of cost cutting and revenue enhancement. Carry-on baggage (one bag plus one personal item) is free, but checked bags cost extra. The first two bags under fifty pounds cost $5 each, with each additional bag after two costing $50. Overweight baggage, those weighing over fifty but under seventy-five pounds, are charged an extra $25, and all bags over seventy-five pounds are not accepted.[16] Skybus does not through-check luggage. If a customer flies through the Skybus hub in Columbus, they must collect any luggage they checked in, and then re-check it in Columbus for the second flight [17]


Though seating is first-come, first-served, passengers can also pay an extra $10 each way for priority seating which will allow them to board right after passengers with disabilities.[18] On-board, everything from food and drinks to pillows cost extra, though once purchased, items do not need to be returned. In order to maximize revenue from these fees, Skybus attempts to strictly enforce their no food and drink policy. They will ask that passengers dispose of food and drink before boarding the plane, however, passengers taking food on board will not be asked to put it away.[19]

Costs and revenue

Attempting to emulate Ryanair's business model and Southwest's people-friendly attitude, Skybus has committed itself to be the least expensive airline in the industry with a projected CASM 28% lower than Southwest. To achieve this, Skybus plans to utilize multiple measures designed to keep revenue high and costs low.

Cost reduction

In an effort to keep maintenance and operating costs to a minimum, most equipment purchased is uniform. This covers the full range of equipment, from engines, to electrical components, to personnel gear. Because of this, Skybus plans on paying significantly less on employee training and for equipment service.

Another major method of cost reduction is to utilize secondary airports, which are generally less congested and charge less to lease space though they may be further from the advertised destination. To save even more money at the airport, passengers board directly from the apron instead of using the jetway, saving both loading/unloading time as well as operating costs. Finally, ticket sales are entirely online. This not only saves on employee costs, but completely eliminates the need for a reservations call center.

Employee wages

In order to keep wages in line with their projected low fares, flight attendants are only paid $9 per flight hour, and will not be paid a per diem. While this is considerably lower than competing airlines' wages, flight attendants also receive 10% of all sales made during the flight bringing them more inline with industry average wages, splitting all commissions evenly among all flight attendants on-board. Starting pilot wages are also below average in terms of hourly rate, starting at $65,000 annually for Captains, and $30,000 for First Officers as a minimum guarantee. The average captains' earnings are about $90,000/year vs $120,000 for a 1st year Captain on the Airbus at airlines like United Airlines but in the case of Skybus this includes a significant stock options and profit share package unique in the airline industry today which depending on airline financial performance can make them the highest paid pilots in the US. Additionally unusual for Skybus flight crew is that there are very few if any over night trips thus giving the crew far less hours away from home (knows as TAFB or time away from base). and higher crew utilization rates for more efficient work schedules. Typical pilot work days are 8-10 hours, which is lower than the industry average 12-14 hours. Typical pilot work months are 14-15 days. [20][21] The average commercial airline pilot wage is approximately $135,000.[22]

Increasing revenue

While cutting costs is a high priority for Skybus, revenue is their primary focus. Skybus aircraft are outfitted as flying gift shops, selling everything from pop and food to perfumes, watches, clothing, and toiletries.[19]

Advertisements can also be seen throughout the cabin and exterior. This can include overhead bins, carpet, tray tables, and full-body exterior advertisements (see below). The price for interior advertisements has not been released, though a company who purchases a full-body advertisement can also buy all interior advertisements for a small increase in price. A complete list of where advertisements will be placed has not been released, however.[23]

Fleet

File:Skybus-nationwide.jpg
Aircraft N522VA, an Airbus A319 displaying a full-body Nationwide Insurance advertisement.

On October 26, 2006, Skybus announced a deal with the European aircraft manufacturer Airbus to buy 65 of their Airbus A319 aircraft. The order carries an estimated retail price of $3.7 billion, though the actual price Skybus will pay has not been announced. Additionally the aircraft are going to come with a 12 year maintenance agreement that is new for Airbus and Skybus is the launch customer for this service plan which helps them manage maintenance costs. Additionally the aircraft will be equipped with the latest in EFB (electronic flight bags) and HUD (heads up display) technology, as well as T2CAS terrain and traffic avoidance technology. Skybus plans to lease aircraft of the same type until the new aircraft begin delivery in late 2008.[24]

On February 14, 2007, Skybus announced they had chosen the CFM56-5B engine built by CFM International to power the 65 A319 aircraft on order from Airbus. The actual price Skybus will pay for the engines was not disclosed, but the list price for the order is estimated at over $750 million.[25]

Skybus Fleet
Aircraft Total Passengers Notes
Airbus A319 7
(65 orders) 		144 (Leased Aircraft)
156 (Owned Aircraft) 		7 in use- Skybus is receiving 9 in December 2007, and more in March 2008.

Livery

Original images of a livery design described by some as "psychedelic" emerged on the internet, but since then the all orange design displaying the butterfly logo on the tail made its appearance on the Columbus tarmac. This design is not the standard livery for all Skybus aircraft, however, as their airplanes are for sale as "branded airplanes" to any company that can afford the $500,000 per year price tag. A branded airplane features a full-body advertisement along the fuselage, with the tail and engines of the plane remaining the Skybus paint scheme. The first sponsored aircraft, aircraft N522VA leased from Virgin America, was recently repainted in a theme promoting Nationwide Mutual Insurance Company.[26] Skybus has also taken advantage of some self-advertizing on the orange tails of its white planes that read, "Skybus. $10 Fares...Only Birds Fly Cheaper."

The first leased aircraft for Skybus are coming from Virgin America, will have only 144 seats on board and will fly with three Flight Attendants.

File:Skybus livery.jpg
Skybus Airlines A319 in orange livery.

Startup incentives

In an effort to attract the airline to the city, as well as support its growth early on, the city of Columbus, along with the Columbus Regional Airport Authority, has offered incentives totaling over $57 million. These incentives include a twelve-year tax credit, promised airport improvements, business loans, and marketing support. Most of the incentives are performance-based, which requires Skybus to create 1000 jobs and complete other milestone to receive the incentives.[27] Incentives such as airport improvements, however, are already complete. When Skybus began operations, they took advantage of $11 million of improvements to their gates in Concourse B at Port Columbus.

Financing

Skybus is financed by numerous high-profile companies nationwide and locally. As of April 2, 2007, Skybus had raised an estimated $160 million in startup capital which includes $72.7 million in their second round of fund raising.[28] This puts Skybus in a positive light with many investors, having raised one of the largest amounts of funds in the history of startup airlines. In comparison, JetBlue Airways, which began operations in 1999, raised $130 million prior to starting ($157 million adjusted for inflation).[29]

Investors

Skybus Airlines' startup finances are currently provided by a number of large investors. These include Fidelity Investments (12.6% ownership), Morgan Stanley (6.4%), Nationwide Mutual Capital (5%), and Tiger Management (4.1%). Smaller investors include: Huntington Capital Investment Co., Wolfe Enterprises (owner of The Columbus Dispatch), and Battelle Services Co. Inc.[30]

References

  1. ^ "Proposal to DOT" (PDF). United States Department of Transportation. 2005-01-07. Retrieved 2007-07-23. {{cite web}}: External link in |authorlink= (help)
  2. ^ "DOT Approval" (PDF). United States Department of Transportation. 2006-04-14. Retrieved 2007-07-23. {{cite web}}: External link in |authorlink= (help)
  3. ^ Wolf, Barnet D. (2007-05-10). "Skybus gets OK from FAA to start flights on May 22". The Columbus Dispatch. pp. Business. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  4. ^ "Skybus gets OK to sell tickets early". The Columbus Dispatch. 2007-04-12. pp. Business F1. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  5. ^ Kemper, Kevin (2001-03-30). "Heartland Airlines grinding to complete stop?". The Columbus Dispatch. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  6. ^ Wilson, Paul (2006-03-22). "Skybus getting closer to takeoff". The Columbus Dispatch. pp. Business D1. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  7. ^ "Notice of Action Taken - Docket OST-2007-28587" (PDF). United States Department of Transportation. 2007-07-24. Retrieved 2007-07-25. {{cite web}}: Check date values in: |date= (help); External link in |authorlink= (help)
  8. ^ "Skybus Airlines official web site". Skybus Airlines LLC. 2007. Retrieved 2007-07-23.
  9. ^ "Cheap-seat airline comes to Milwaukee". Milwaukee Journal Sentinel. 2007-09-19. Retrieved 2007-09-19. {{cite web}}: Check date values in: |date= (help); External link in |authorlink= (help)
  10. ^ Bayles, Tom (2007-07-04). "Charlotte on verge of getting airline service". Herald Tribune. p. 1. Retrieved 2007-07-04. {{cite news}}: Check date values in: |date= (help)
  11. ^ Fliss, Bob (2007/9/18). "Coppola announces Skybus plans for Charlotte". Charlotte Sun-Herald. p. 1. Retrieved 2007-09-18. {{cite news}}: Check date values in: |date= (help)
  12. ^ Gardiner, Gary (2007/9/20). "Skybus adding four new destinations". USA Today. p. 1. Retrieved 2007-09-20. {{cite news}}: Check date values in: |date= (help) "Skybus Airlines official web site". Skybus Airlines LLC. 2007. Retrieved 2007-09-25.
  13. ^ "Discount Airline To Cut Flights". WBNS news. 2007. Retrieved 2007-10-16.
  14. ^ Matzer Rose, Marla (2007-10-22), Skybus to make Greensboro, N.C., second hub, retrieved 2007-10-22{{citation}}: CS1 maint: date and year (link)
  15. ^ Matzer-Rose, Martha (2007-04-24). "Skybus starts selling tickets today, with some one-way fares for $10". The Columbus Dispatch. pp. Business A1. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  16. ^ "Skybus - Baggage Rules and Info". Skybus Airlines LLC. 2007. Retrieved 2007-07-23.
  17. ^ "Skybus to add 4 cities, 2 planes in December". Columbus Dispatch. 2007. Retrieved 2007-09-20.
  18. ^ "Skybus - Priority Boarding". Skybus Airlines LLC. 2007. Retrieved 2007-07-23.
  19. ^ a b "Skybus - During Your Flight". Skybus Airlines LLC. 2007. Retrieved 2007-07-23.
  20. ^ "Major-National-LCC: Skybus". Airline Pilot Central. 2007-08-04. Retrieved 2007-08-04. {{cite web}}: Check date values in: |accessdate= and |date= (help); External link in |authorlink= (help)
  21. ^ Ferenchik, Mark (2007-05-09). "Skybus hires employees as it gets ready for departure". The Columbus Dispatch. pp. Metro and State C8. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  22. ^ "May 2005 National Occupational Employment and Wage Estimates". U.S. Bureau of Labor Statistics. 2006-05-01. Retrieved 2007-04-08. {{cite web}}: Check date values in: |accessdate= and |date= (help); External link in |authorlink= (help)
  23. ^ "Skybus Update". airliners.net. 2007. Retrieved 2007-07-23.
  24. ^ Matzer-Rose, Marla (2006-10-26). "Skybus orders 65 jets from Airbus". The Columbus Dispatch. pp. Business F1. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  25. ^ Matzer-Rose, Marla (2007-02-14). "Skybus puts $750 million order in for engines". The Columbus Dispatch. pp. Business D1. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  26. ^ Matzer-Rose, Marla (2007-04-11). "Nationwide takes to the air with Skybus ads". The Columbus Dispatch. pp. Business D1. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  27. ^ "City of Columbus offers major incentives". Skybus. 2006. Retrieved 2007-07-23.
  28. ^ "More cash raised for Skybus". The Columbus Dispatch. 2007-04-02. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  29. ^ "Inflation Rate in Percent for Jan 2000-Present". InflationData.com. 2007. Retrieved 2007-07-23. {{cite web}}: External link in |authorlink= (help)
  30. ^ Matzer-Rose, Marla (2007-04-03). "Investor support buoys Skybus". The Columbus Dispatch. pp. Business C1. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
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