No connections, $10 airfares, and poor management…Skybus was a perfect case of poor execution by a startup airline.
Skybus was a privately held ultra-low cost airline operating out of Columbus, Ohio whose goal was to be the least expensive carrier in the U.S. In fact, their company slogan was “Only Birds Fly Cheaper.” That may have been factually true, since Skybus was known for selling ten one-way seats on each flight for only $10 each. At the time, airline executives aimed for a forcasted CASM (Cost Per Available Seat Mile) 28% lower than Southwest Airlines which would generate huge profits for investors like Fidelity, Morgan Stanley, Nationwide Mutual Capital and Tiger Management. To meet this lofty goal, Skybus slashed expenses and had novel ways of generating revenue, not the least of which was severely underpaying employees.
In exchange for the low fares, passengers were required to pay extra for everything and were offered merchandise for sale. The airline was the first to charge for baggage. Delta, United and Northwest would later follow suit and charge fees for checked baggage, as well. Skybus also sold advertising space inside and outside the aircraft.
Its business model was similar to European ultra-low cost carrier Ryanair, flying routes not offered by other airlines, mostly into secondary airports. As an example, a route through Portsmouth, NH served the Boston market.
Skybus was in operation for slightly more than two years between March 2006 and April 2008. The company cited rising fuel costs and the lagging economy as reasons for shutting down. But the real reasons for its demise were probably more complicated and likely had to do with a lack of foresight from management more than anything else.
The bad press from the Christmas 2007 cancellations certainly did not help Skybus and fuel costs at the time were definitely on the rise; however, it may be the threat of unionization that was the final nail in the Skybus coffin.
Skybus Pilots Attempt at Unionization
Below-market compensation was part and parcel of the Skybus business model. Flight attendants were paid a measly $9 per flight hour and asked to sell merchandise on commission to supplement their salaries. Pilots’ wages were also well below the norm. Captains’ salary was about $90,000 compared with $120,000 at airlines like United.
Skybus pilots were organizing a union and had plans to join Local 747 of the International Brotherhood of Teamsters in Houston. They had enough signatures for a referendum and it was expected that unionization would be complete by April 2008. Unionization and having to pay pilots at-par wages would have been a real drag on Skybus’ bottom line and would also pave the way for other employee groups to unionize. It is probably not a coincidence then that the airline ceased operations in April 2008, shutting down any possibility for unionization and no longer padding the wallets of their prominent investors.
Here is a brief rundown of the discount airline’s history:
Spring 2005: Founder John Weikle saw an opportunity when America West pulled out of its Columbus hub. Weikle began raising capital and when Skybus commenced operations, it was one of the most well-capitalized airlines in history.
April 2007: Skybus announced its initial eight routes, all originating from the hub at Port Columbus International.
May 2007: The airline announced plans for major expansion even though these expansion plans were not a part of the original business model. That summer, the DOT granted Skybus permission to fly internationally to Cancun, Mexico and Nassau, Bahamas.
October 2007: Service cuts were announced on long haul routes. Management blamed rising fuel costs.
Christmas 2007: The carrier made headlines for canceling about 1/4 of its scheduled routes over two days, citing issues with two of its seven planes. Management neglected to secure de-icing contracts ahead of the winter months. This led to significant additional de-icing costs and an onslaught of consumer complaints.
February 2008: Skybus ended service to the West coast with the exception of one daily nonstop flight to Burbank, CA.
April 4, 2008: The airline totally ceased operations. Here’s a terrible video of the last flight.
