Skybus Airlines

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This article or section contains information about a planned or expected new airline in the United States. It may contain information of a speculative nature and the content may change dramatically as development continues, the launch date approaches, and as more information becomes available.

Skybus Airlines
IATA N/A	ICAO SKB	Callsign Skybus
Founded		2006
Hubs		Port Columbus International Airport
Fleet size		8 (65 on order)
Destinations		Announcement soon
Parent company		Skybus Airlines LLC.
Headquarters		Columbus, Ohio
Key people		Bill Diffenderffer (CEO), Kenneth L. Gile (President & COO), Charlie Clifton (Board of Managers)
Website: http://www.skybus.com

Skybus Airlines is an airline based in Columbus, Ohio, USA. It is an ultra-low-cost carrier, modeled after the European airline Ryanair. Skybus plans the cheapest airline in the United States, with fares up to 25% cheaper than Southwest. Its business model includes advertising on the interior and exterior of its aircraft as well as selling merchandise onboard to increase revenue. Skybus has been criticized for many of its cost cutting measures, although the airline has yet to begin passenger operations.

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] Airline certification is still pending from the Federal Aviation Administration, which is required before any aircraft can carry passengers.^[3] In an attempt to get a head start on marketing flights, however, Skybus is seeking a waiver from the DOT to begin marketing before the application is approved.^[4] It currently plans on starting operations as early as May 20, 2007.

[edit] History

What was to become Skybus was initially founded in the late 1990s by John Weikle and Ken Gile. 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. 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.

[edit] Services

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

Operations are scheduled to begin in May of 2007 to destinations in Florida and California, although no specific destinations have been disclosed yet.

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.

[edit] Cost Reduction

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

Another major method of cost reduction will be to utilize secondary airports, which are generally less congested and charge less to lease space. To save even more money at the airport, passengers will board directly from the apron instead of using the jetway, saving both loading/unloading time as well as operating costs. Finally, ticket sales will be 100% online. This not only saves on employee costs, but will completely eliminate the need for a reservations counter, saving airport floor space rental costs.

[edit] Employee Wages

In order to keep wages in line with their projected low fares, flight attendants will only be paid $9 per hour. While this is considerably lower than competing airlines' wages, flight attendants will also receive 10% of all sales made during the flight. Starting pilot wages will also be below average, starting at $65,000 annually. The average starting pilot wage is approximately $100,000.

[edit] Increasing Revenue

While cutting costs is a high priority for Skybus, revenue is their primary focus. Skybus aircraft will be outfitted as flying duty-free shops, selling everything from soda and food to perfumes, watches, clothing, and toiletries.

Advertisements will also be seen throughout the cabin and exterior. This will include overhead bins, carpet, tray tables, and full-body exterior advertisements (see below). A complete list of where advertisements will be placed has not been released, however, and what the interior will look like is also unknown.^[5]

[edit] Fleet

Aircraft N522VA, an Airbus A-319 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 billion, though the actual price Skybus will pay has not been announced. Skybus plans to lease aircraft of the same type until the new aircraft begin delivery in late 2008.^[6][7] 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.^[8]

[edit] Livery

Recently Skybus flew their first test flight, showing off their planned aircraft livery. Earlier, photographs of a 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 may not be the standard livery for all Skybus aircraft, however, as their airplanes will be for sale as "flying billboards" to any company that can afford the price. While no specifics have been released to the public, aircraft N522VA, an Airbus A319 leased from Virgin America, was recently repainted in a theme promoting Nationwide Mutual Insurance Company.

[edit] Criticism

While Skybus Airlines has yet to carry a single passenger, major criticism over the airline's policies has already arisen. Complaints over low wages are of top concern, with fears that underqualified employees will not be able to care for passengers properly or respond to emergencies adequately. Also of concern is the commission earned by flight attendants. Not only are there fears of trained flight attendants balking at the low starting wages, but it is thought that the attendants will be pushy to sell merchandise in order to make more money.

Placing the hub in Columbus has also been criticized. While Port Columbus is a major airport, it is still small compared to most other major airports. Because of this, critics feel that the market in Columbus is not large enough to support a major hub.

People are also skeptical of the boarding procedures Skybus plans to implement. While ground boarding is not uncommon, it is feared that passengers will not be willing to fly on Skybus during the winter, which can be very cold and icy in Columbus.

[edit] 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 totalling 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 milestones to receive the incentives.^[9] Incentives such as airport improvements, however, have already begun. When Skybus begins operations, they will take advantage of $8 million of improvements to their gates in Concourse B at Port Columbus.

[edit] Financing

Skybus is financed by numerous high-profile companies nationwide and locally. As of April 2, 2007, Skybus has raised an estimated $160 million in startup capital, and $72.7 million in their second round of fund raising alone. 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.

[edit] Investors

Skybus Airlines' startup finances is 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.^[10]

[edit] External links

• Skybus Airlines
• Emerging Airline Summary

[edit] References

1. ^ Proposal to DOT
2. ^ DOT Approval
3. ^ Skybus awaiting approval from FAA
4. ^ More cash raised for Skybus
5. ^ Skybus Update
6. ^ Skybus orders 65 jets from Airbus
7. ^ Airliner World January 2007
8. ^ Skybus puts $750 million order in for engines
9. ^ City of Columbus offers major incentives
10. ^ Investor support buoys Skybus