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Skybus Airlines

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Skybus Airlines
IATA ICAO Callsign
SX SXB SKYBUS
Founded2004
Commenced operationsMay 22, 2007
Ceased operationsApril 5, 2008
HubsPort Columbus International Airport
Secondary hubsPiedmont Triad International Airport
Fleet size12 (63 firm orders at time of shutdown)
Destinations17
Parent companySkybus Airlines, Inc.
HeadquartersUnited States Columbus, Ohio
Key peopleMike Hodge (CEO & CFO)

Kenneth L. Gile (President & COO)

Charlie Clifton (Board of Managers)
Websitehttp://www.skybus.com

Skybus Airlines was a privately-held airline based in Columbus, Ohio, USA. It operated as an ultra-low-cost carrier modeled after the European airline Ryanair and the early years of Southwest Airlines, aimed to be the least expensive airline in the United States. The business model was heavily reliant on flying routes where other airlines did not have direct flights, as Ryanair did in Europe, thus keeping competition to a minimum, and on flying into secondary airports, rather than heavily-trafficked ones. The business model also included advertising on the interior and exterior of its aircraft as well as selling merchandise onboard. The airline applied for operating approval on January 1, 2005, [1] received approval to operate on March 15, 2006, [2] and FAA certification on May 10, 2007.[3]It had been granted a waiver to begin ticket sales on April 24, 2007;[4] the first flights out of Columbus began on May 22, 2007. Less than a year later, Skybus announced on April 4, 2008 that it would cease operations as of April 5, citing the lagging economy and rising fuel costs as causes.[5]

History

Heartland Airlines

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.[6]

Skybus Airlines

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, the creators started gathering capital to start the airline in that city.[7]

File:Skybus waiting area.jpg
Waiting area under Concourse B on the ground level at Port Columbus. Skybus passengers embarked and disembarked 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 originated from their hub at Port Columbus International Airport in Columbus. At first Skybus operated a strict hub-and-spoke service, not booking flights between destination cities that were not Columbus, but the company later 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.

On May 22, 2007 Skybus Airlines began service to and from Port Columbus International Airport and its initial eight destinations. The airline also announced its intention to rapidly expand. As part of its business model, Skybus favored smaller cheaper airports near major markets. For example in the Boston, MA area Skybus chose Portsmouth airport. This model received criticism as many of these smaller airports did not have services travelers were expecting or other scheduled service to leverage in the event of flight cancelations. The airline also did not use jetways, using ground-level-boarding ramps and airstairs instead.

Skybus marketed its self as an ultra low cost carrier, selling ten seats on each flight for $10. The low fares came with a reduction of frills. There were charges for virtually everything else (see Skybus business model).

On July 24, 2007, the U.S. Department of Transportation granted Skybus the right to fly international flights to Cancún, Mexico and Nassau, Bahamas.[8]

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.[9]

As of October 25, 2007 all press releases and references to the international service were removed from the Skybus website.

The airline made news during the Christmas 2007 holiday travel season, when it encountered major undisclosed problems with two of its planes resulting in the cancelation of about 25% of its scheduled service over a two day period.

On March 24, 2008 Skybus announced that their chief executive, Bill Diffenderffer had resigned to return to his previous occupation as an author.[10]

Destinations

Main article: Skybus Airlines destinations

On its last day of operation, Skybus provided service to 17 destinations throughout the United States. Skybus began its inaugural flight on May 22, 2007, when the airline began flights from their Port Columbus hub. The first service that does not include its Columbus hub began December 17, 2007, when Skybus began flights between Portsmouth and St. Augustine as well as Punta Gorda, Florida.[11]

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 was expected to resume once the airline obtained 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 February 6, 2008, Skybus was to be ending service to Oakland on May 31, 2008. [12]

On October 22, 2007, Skybus announced the opening of a new focus city at Piedmont Triad International Airport in Greensboro, North Carolina. [13]

On March 8, 2008, Skybus landed its first flight at New Castle Airport, south of Wilmington, Delaware. Many travelers in the Philadelphia area preferred the smaller airport without the congestion issues of PHL. [14]

Skybus announced on March 19, 2008 that "previously announced service between Columbus and Niagara Falls, NY, [before it even started], as well as a previously announced second daily flight between Columbus and Milwaukee, will not begin." Also announced was all service to/from Chattanooga, TN would end on April 14, 2008, along with a cut from two to one daily flight from Greensboro, NC and Wilmington, DE, and elimation of the Greensboro, NC and Gulfport-Biloxi, MS flight.

On April 4, 2008 Skybus announced the cessation of all flights effective with the last scheduled departure of the day.

Service was set to begin on June 1, 2008 between New York (Stewart International Airport / Newburgh, NY) and Boston (Portsmouth, NH), Hartford (Chicopee, MA) and Punta Gorda, FL, Hartford and St. Augustine, FL, and Richmond, VA and St. Augustine.

Skybus business model

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

Fares

Advertised fares to all current target cities began at US$10 one-way; the price increased as more tickets were sold for that flight. It was advertised that there were ten seats for $10. With some of Skybus's less popular routes, they had featured tickets for $20.08 (plus taxes and fees) to bring in the new year. Ticket prices for the remaining fares were expected to be around half the price of other airlines. These fares did not include taxes and other airport fees, however, which add about $10 to a one-way ticket. All fees included, the cheapest round-trip ticket for one adult would have cost approximately $40.[15]

Extra fees

Skybus charged extra fees for almost everything other than the ticket itself. This is common among low-fare carriers in the airline industry today with many airlines assessing similar charges for baggage and food. Carry-on baggage (one bag plus one personal item) was free, but checked bags incurred an additional charge. The first two bags under fifty pounds were $10 each online or $12 each at the counter, with each additional bag after two incurring a charge of $50 per bag. Overweight baggage, those weighing over fifty but under seventy-five pounds, was charged an extra $25, and all bags over seventy-five pounds were not accepted.[16] Skybus did not through-check luggage. If a customer flew through the Skybus hub in Columbus, he or she had to collect any luggage he or she checked in, and then re-check it in Columbus for the second flight. [17]

Seating was first-come, first-served. Passengers paid an extra $10 per person per direction for priority seating, which allowed a passenger to board right after passengers with disabilities.[18] On-board, everything from food and drinks to pillows had an additional charge; once purchased, items did not need to be returned. In order to maximize revenue from these fees, Skybus attempted to strictly enforce its no food and drink policy. The airline required passengers dispose of food and drink before boarding the plane. The exceptions were baby formula or baby food, special food for those with a medical condition such as diabetes or severe food allergies, or those with dietary restrictions (Kosher, Halal, etc). [19]

Cost reduction

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

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

Employee wages

Keeping wages in line with their projected low fares, flight attendants were paid $9 per flight hour, and were not paid a per diem. While this was considerably lower than competing airlines' wages, flight attendants also received 10% of all sales made during the flight, splitting all commissions evenly among all flight attendants on-board. Starting pilot wages were 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 captain's earnings were about $90,000 vs $120,000 per year for a 1st year Captain at airlines like United Airlines but in the case of Skybus this included a significant stock options and profit share package unique in the airline industry. Additionally unusual for Skybus flight crew was that there were very few if any overnight trips thus giving the crew far less hours away from home (known as TAFB or time away from base) and higher crew utilization rates for more efficient work schedules. Typical Skybus pilot work days were 8-10 hours long (FAA max is 16hrs), which was lower than the industry average 12-14 hours. Typical pilot work months were 14-15 days with no overnights. [20]

[21]The Average pilot in the US has a work month of 16-17 days, and the average airline pilot wage is approximately $135,000 averaged between first officer and captain pay.[22]

Skybus was one of the few 100% non-union airlines in the United States at time of its shutdown. It was facing a union organizing campaign from its pilots, who had collected enough signatures to hold an union referendum. The pilots were seeking to join Local 747 of the International Brotherhood of Teamsters, based in Houston, TX. Because of the amount of signatures collected it was presumed that the campaign would be successful. The election would have most likely occured sometime in April 2008. Successful unionization, would have severely undermined Skybus' below market compensation philosophy and laid the framework for union activity among other Skybus employee groups.

Increasing revenue

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

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

Shutdown and bankruptcy

On April 4, 2008 Skybus announced they were shutting down all flight operations. The airline also said it would seek Chapter 11 bankruptcy protection.[5]

A statement on its website regarding the shutdown said that "Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment. These two issues proved to be insurmountable for a new carrier." Skybus was the fourth United States based airline to shut down the week of March 31 2008 following Aloha Airlines, ATA Airlines and charter airline Champion Air.[5]

At the time of the shutdown Skybus employed about 450 people, mostly in the Columbus, Ohio area. All were immediately laid off. Passengers were left stranded on round trips.[24]

Fleet

File:Skybus-nationwide.jpg
Aircraft N522VA, an Airbus A319 (leased from Virgin America) displaying a full-body Nationwide Mutual Insurance Company advertisement.

On October 26, 2006, Skybus announced a deal with the European aircraft manufacturer Airbus to buy 65 of its Airbus A319 aircraft. The order carried an estimated retail price of $3.7 billion, though the actual price Skybus would have paid had not been announced. Additionally the aircraft were going to come with a 12 year maintenance agreement that was new for Airbus and Skybus was the launch customer for this service plan which helped them manage maintenance costs. Additionally the aircraft would have been equipped with the latest in EFB (electronic flight bags) and HUD (heads up display) technology, as well as TCAS II terrain and traffic avoidance technology which is integrated in with a EGPWS technology box that protects from terrain collision. Skybus planned to lease aircraft of the same type until the new aircraft begin delivery in late 2008.[25]

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 would have paid for the engines was not disclosed, but the list price for the order is estimated at over $750 million.[26]

As of April 2008, the Skybus Airlines fleet consisted of 13 Airbus A319 aircraft (out of a total order of 63), 12 received in December 2007 and one in March 2008, two of which were leased from Virgin America.[27] The average age of the fleet was of 4.3 years. [28]

Livery and advertising

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 was not the standard livery for all Skybus aircraft, however, as its airplanes were available as "branded airplanes" to any company that paid $500,000 per year for this. A branded airplane featured a full-body advertisement along the fuselage, with the tail and engines of the plane remaining in the Skybus paint scheme. The first sponsored aircraft, aircraft N522VA leased from Virgin America, promoted the theme "Nationwide is on Your Side" Nationwide Mutual Insurance Company. It was created by an airplane media company, SkyBrand, based in Seattle.[29] Skybus had also had some self-advertising on the orange tails of its white planes that read, "Skybus. $10 Fares...Only Birds Fly Cheaper."

The first leased aircraft for Skybus that came from Virgin America, had 144 seats on board, and flew with three flight attendants.

File:Skybus livery.jpg
Skybus Airlines A319 (N521VA) (Leased from Virgin America) in orange livery.

Incidents

  • On January 17, 2008, a man threatened passengers on a flight from Columbus to Fort Lauderdale. The plane landed safely back at Port Columbus Airport and the unruly man was arrested by the FBI.[30]
  • On April 1, 2008, a 26 year old man from Columbus, Ohio had a stolen Skybus emergency lifevest in his carry-on luggage. During X-Ray examination of the bag, TSA screeners at Stewart International Airport (New York/Newburgh) thought the metal material, batteries, and wires in the folded vest looked like a bomb. The passenger terminal was evacuated and the State Police Bomb Disposal Unit removed the item for examination. The passenger was charged with criminal nuisance and criminal possession of stolen property.[31]

Criticisms

Skybus hubs (CMH and GSO) did not provide connection opportunities for passengers. Skybus highly discouraged connections; as such, passengers that wished to interchange at hubs must have moved bags between flights (on their own) as bags could not be checked on a multi-segment itinerary.[32]

The airline was further criticized for its $10 Walmart style fares, giving the so-called Walmart Demographic (namely lower class citizens and illegal immigrants) the ability to travel around the country for similar prices. An investigation seeking the connection between Walmart Corporate and Skybus was hinted, but never followed. [33] [34]

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, had offered incentives totaling over $57 million. These incentives included a twelve-year tax credit, promised airport improvements, business loans, and marketing support. Most of the incentives were performance-based, which required Skybus to create 1000 jobs and complete other milestones to receive the incentives.[35] Incentives such as airport improvements, however, were already completed. When Skybus began operations, they took advantage of $11 million of improvements to their gates in Concourse B at Port Columbus.

Financing

Skybus was 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.[36] That was among the largest amounts of start-up funding in the history of airlines. By comparison, JetBlue Airways, which began operations in 1999, raised $130 million prior to starting ($157 million adjusted for inflation).[37]

Investors

Skybus Airlines' startup finances were provided by a number of large investors. These included 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.[38]

Financial performance

Skybus reported a loss of $16 million during its first three months of operation. A Skybus spokesman said that these results were "in line" with expectations for an airline startup. During that period, Skybus planes were 79% full, placing the airline sixteenth highest among 96 reporting airlines. Passenger yield for the quarter was 5.08 cents/mile, compared with Southwest's 12.50 cents/mile and the 13.00-cent/mile average among major national carriers.[39]

References

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  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. ^ a b c "Low-cost carrier Skybus calls it quits". MSNBC. 2008-04-04. Retrieved 2008-04-05. {{cite news}}: Check date values in: |date= (help)
  6. ^ 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)
  7. ^ 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)
  8. ^ "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)
  9. ^ "Skybus Airlines official web site". Skybus Airlines LLC. 2007. Retrieved 2007-07-23.
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  11. ^ Gardiner, Gary (2007-09-20). "Skybus adding four new destinations". USA Today. 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.
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  13. ^ Matzer Rose, Marla (October 22, 2007), Skybus to make Greensboro, N.C., second hub, retrieved 2007-10-22
  14. ^ First Skybus Flight Lands in Delaware, 2008-03-08, retrieved 2008-03-08
  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. {{cite news}}: Check date values in: |date= (help)
  16. ^ "Skybus - Baggage Rules and Info". Skybus Airlines LLC. 2007. Retrieved 2007-07-23.
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  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.
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  25. ^ 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)
  26. ^ 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)
  27. ^ Skybus Fleet Detail
  28. ^ Skybus Fleet Age
  29. ^ 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)
  30. ^ "FBI Arrests Man Accused Of Threatening Passengers On Skybus Flight". The National Terror Alert Response Center. 2008-01-20.
  31. ^ Michael Randall, "Airline passenger charged in bomb scare in Stewart Airport", Times Herald-Record, April 2, 2008
  32. ^ Skybus - Where We Fly
  33. ^ http://walmartwatch.com/
  34. ^ http://anti-illegalimmigrationevents.com/
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  36. ^ "More cash raised for Skybus". The Columbus Dispatch. 2007-04-02. Retrieved 2007-07-23. {{cite news}}: Check date values in: |date= (help)
  37. ^ "Inflation Rate in Percent for Jan 2000-Present". InflationData.com. 2007. Retrieved 2007-07-23. {{cite web}}: External link in |authorlink= (help)
  38. ^ 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)
  39. ^ Matzer-Rose, Marla (2007-12-18). "Skybus in the red by $16 million". The Columbus Dispatch. pp. Business C1. Retrieved 2007-12-18. {{cite news}}: Check date values in: |date= (help)
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