Skybusted
April 10, 2008
Central Ohio’s economy recently lost one of its favorite new companies as maverick airline Skybus recently announced that it was throwing in the towel, less than a year after taking to the sky. In reality though, the day of reckoning should have been painfully obvious to the casual observer. In fact, a mere 10 months ago, I blogged about the coming demise of this silly maverick airline.
That isn’t to say that Skybus was a complete disaster; in the last month in operation, it edged out Southwest as the busiest carrier at Port Columbus Airport. Of course, its collapse ultimately comes as a big blow not just to Skybus employees, who found themselves abruptly out of work, but also for Columbus travelers, who now find themselves with significantly fewer options for travel out of Port Columbus. Earlier this year, JetBlue decided to ditch the Columbus market entirely, as other carriers reduced service. It isn’t clear if those carriers will pick up Skybus’s slack, but even if they do, the short term damage has already been done.
So as Skybus joins the graveyard of failed airlines, I’m sure that back in New York, a group of Wall Street cowboys are cooking up plans for the next eccentric airline to hit the skies. In an attempt to learn from the mistakes of the past, I’ve put together a short list of lessons that I hope these guys can take to heart.
Lesson One: An airline can only make money if it controls its fuel costs. I’ve been harping about this issue on this blog for years. The cost of fuel is in an uptrend and will continue to rise until the world comes up with some reasonable alternative. Fortunately for individuals, we can adjust our lives to compensate for these challenges. Moving closer to work and reducing travel is the best way to offset rising energy costs; changing the type of vehicle we drive is another method. Airlines, unfortunately, do not have this luxury. Commercial jets are gas guzzlers and there isn’t exactly a Honda Civic style aircraft that these guys can switch to in the next upgrade cycle (sans the Boeing 787 Dreamliner, which won’t be available for years in the future). Additionally, for logistical reasons, airlines fly whether their planes are completely full or nearly empty. Running an airline and hoping fuel prices will stay in an affordable range is as good of a business strategy as taking the company’s money to Vegas and sticking quarters in slot machines – you might have a few good hours of play, but over time you will lose everything.
Lesson Two: Alternative airports don’t always make sense. Proponents of smaller, regional airports often point to Southwest Airlines and their embrace of the smaller airport. A closer look at Southwest’s strategy reveals that it only makes sense in some instances. In Dallas, Houston and Chicago, for example, Southwest flies into Love Field, Hobby and Midway, respectively. The key is that these are not just smaller alternative airports, but they are also closer to the city than the larger, international airports, Dallas/Fort Worth, Intercontinental, and O’Hare. In the northeast, Southwest services Manchester, Providence, and Long Island; but its market performance in places like Boston and Manhattan is considerably weaker than the competition. The point is that some alternative airports have the added benefit of also being more conveniently located – others don’t. Skybus attempted to use alternative airports that were located in the boondocks of major cities with inconvenient access to the major city. Even if Skybus could offer the best fare to a city like Gary, Indiana, for example, the price I’d pay in cash and time to get myself into Chicago certainly doesn’t make it worth it. Some consumers were willing to pay it – but obviously not the ones that were willing to pay for the convenience of traveling into the city they need to visit. Most airlines have figured this out, which leads me to…
Lesson Three: Know your customers. The truth is that Skybus tried to market its product to an audience that was gullible enough to fall for the “10 fares for 10 dollars” hype. These are people that are so cheap that they will do anything and everything in their power to save a buck. I don’t quite understand how Skybus, then, expected to generate substantial revenue by peddling all kinds of random crap on the aircraft. Honestly, I do not know exactly how good or bad merchandise sales were on Skybus flights, but certainly they weren’t good enough. As most airlines have learned by this point – the real revenue is made on business travelers, who are willing to pay up for amenities, exactly those which Skybus attempted to strip out to keep its fare prices so low.
On a final note – I do find it ironic that the founder or Skybus retired just weeks before the company went bankrupt in order to “pursue his novel writing career”. I think he might have confused fiction with reality when he started Skybus, as it really does seem surprising that this airline actually existed for any period of time.
That isn’t to say that Skybus was a complete disaster; in the last month in operation, it edged out Southwest as the busiest carrier at Port Columbus Airport. Of course, its collapse ultimately comes as a big blow not just to Skybus employees, who found themselves abruptly out of work, but also for Columbus travelers, who now find themselves with significantly fewer options for travel out of Port Columbus. Earlier this year, JetBlue decided to ditch the Columbus market entirely, as other carriers reduced service. It isn’t clear if those carriers will pick up Skybus’s slack, but even if they do, the short term damage has already been done.
So as Skybus joins the graveyard of failed airlines, I’m sure that back in New York, a group of Wall Street cowboys are cooking up plans for the next eccentric airline to hit the skies. In an attempt to learn from the mistakes of the past, I’ve put together a short list of lessons that I hope these guys can take to heart.
Lesson One: An airline can only make money if it controls its fuel costs. I’ve been harping about this issue on this blog for years. The cost of fuel is in an uptrend and will continue to rise until the world comes up with some reasonable alternative. Fortunately for individuals, we can adjust our lives to compensate for these challenges. Moving closer to work and reducing travel is the best way to offset rising energy costs; changing the type of vehicle we drive is another method. Airlines, unfortunately, do not have this luxury. Commercial jets are gas guzzlers and there isn’t exactly a Honda Civic style aircraft that these guys can switch to in the next upgrade cycle (sans the Boeing 787 Dreamliner, which won’t be available for years in the future). Additionally, for logistical reasons, airlines fly whether their planes are completely full or nearly empty. Running an airline and hoping fuel prices will stay in an affordable range is as good of a business strategy as taking the company’s money to Vegas and sticking quarters in slot machines – you might have a few good hours of play, but over time you will lose everything.
Lesson Two: Alternative airports don’t always make sense. Proponents of smaller, regional airports often point to Southwest Airlines and their embrace of the smaller airport. A closer look at Southwest’s strategy reveals that it only makes sense in some instances. In Dallas, Houston and Chicago, for example, Southwest flies into Love Field, Hobby and Midway, respectively. The key is that these are not just smaller alternative airports, but they are also closer to the city than the larger, international airports, Dallas/Fort Worth, Intercontinental, and O’Hare. In the northeast, Southwest services Manchester, Providence, and Long Island; but its market performance in places like Boston and Manhattan is considerably weaker than the competition. The point is that some alternative airports have the added benefit of also being more conveniently located – others don’t. Skybus attempted to use alternative airports that were located in the boondocks of major cities with inconvenient access to the major city. Even if Skybus could offer the best fare to a city like Gary, Indiana, for example, the price I’d pay in cash and time to get myself into Chicago certainly doesn’t make it worth it. Some consumers were willing to pay it – but obviously not the ones that were willing to pay for the convenience of traveling into the city they need to visit. Most airlines have figured this out, which leads me to…
Lesson Three: Know your customers. The truth is that Skybus tried to market its product to an audience that was gullible enough to fall for the “10 fares for 10 dollars” hype. These are people that are so cheap that they will do anything and everything in their power to save a buck. I don’t quite understand how Skybus, then, expected to generate substantial revenue by peddling all kinds of random crap on the aircraft. Honestly, I do not know exactly how good or bad merchandise sales were on Skybus flights, but certainly they weren’t good enough. As most airlines have learned by this point – the real revenue is made on business travelers, who are willing to pay up for amenities, exactly those which Skybus attempted to strip out to keep its fare prices so low.
On a final note – I do find it ironic that the founder or Skybus retired just weeks before the company went bankrupt in order to “pursue his novel writing career”. I think he might have confused fiction with reality when he started Skybus, as it really does seem surprising that this airline actually existed for any period of time.
