Skybus in the red by $16 million
Numbers not a surprise, airline says, but analysts are wary
Tuesday, December 18, 2007 3:10 AM
By Marla Matzer Rose
THE COLUMBUS DISPATCH
The first look at Skybus Airlines' financial performance shows that the no-frills Columbus startup lost $16 million during the three months ended Sept. 30.
Company officials said they expected to lose money before becoming profitable sometime next year, while some analysts said this first look provided some troubling signs for the airline.
Skybus' loss was based on operating revenue of $22 million, according to data released by the U.S. Department of Transportation yesterday. Skybus planes were 79 percent full on average during its first few months, a respectable number that put the airline sixteenth among the 96 reporting airlines.
Skybus officials said the data represent only a few months when Skybus was just starting to fly and was ramping up for flights added after the end of September. The results were "in line" with expectations, said Bob Tenenbaum, airline spokesman.
Still, two airline experts expressed concern that Skybus' yields -- an industry benchmark that is calculated by dividing passenger revenue by passenger miles -- have been very weak. In October, Skybus moved to address that by announcing that it would cut three of its five West Coast flights, since long-haul flights can't generate enough additional revenue to cover the added operating costs.
Skybus' passenger yield for the quarter was 5.08 cents, compared with Southwest Airlines' 12.50 and the average 13.00 among major national carriers.
"These are rock-bottom yields, especially in this age of skyrocketing fuel costs," said Joseph Schwieterman, a DePaul University professor and former pricing analyst for United Airlines.
"In fairness to them, this is their first quarter, and the traffic growth has been quite impressive," Schwieterman continued. "But their costs may not allow selling so many seats at nominal prices. The (passenger numbers) are solid for a startup, but the publicity generated by the $10 fares isn't filling up the seats."
A number of airlines this summer were reporting planes that were 85 percent to 90 percent full on average. Since its launch, Skybus has sold at least 10 seats on every flight for $10 -- a price that the airline admits doesn't turn a profit but that's designed to gain publicity and stimulate demand.
Another industry consultant, Mike Boyd of the Evergreen, Colo.-based Boyd Group, called the yield numbers "appalling." Boyd, who has long said he didn't think the Skybus model would work, said yesterday that the figures prove his prediction.
"This is just not a very good plan, but that doesn't mean they can't turn it around by scrapping the model," Boyd said. "There are examples of airlines that changed plans. Frontier Airlines is now highly successful, for example. (Skybus officials) need to see they've got a problem on their hands and fix it if they want to be around in a year."
The Dispatch Printing Company, publisher of The Dispatch, owns a minority stake in Skybus.
Numbers not a surprise, airline says, but analysts are wary
Tuesday, December 18, 2007 3:10 AM
By Marla Matzer Rose
THE COLUMBUS DISPATCH
The first look at Skybus Airlines' financial performance shows that the no-frills Columbus startup lost $16 million during the three months ended Sept. 30.
Company officials said they expected to lose money before becoming profitable sometime next year, while some analysts said this first look provided some troubling signs for the airline.
Skybus' loss was based on operating revenue of $22 million, according to data released by the U.S. Department of Transportation yesterday. Skybus planes were 79 percent full on average during its first few months, a respectable number that put the airline sixteenth among the 96 reporting airlines.
Skybus officials said the data represent only a few months when Skybus was just starting to fly and was ramping up for flights added after the end of September. The results were "in line" with expectations, said Bob Tenenbaum, airline spokesman.
Still, two airline experts expressed concern that Skybus' yields -- an industry benchmark that is calculated by dividing passenger revenue by passenger miles -- have been very weak. In October, Skybus moved to address that by announcing that it would cut three of its five West Coast flights, since long-haul flights can't generate enough additional revenue to cover the added operating costs.
Skybus' passenger yield for the quarter was 5.08 cents, compared with Southwest Airlines' 12.50 and the average 13.00 among major national carriers.
"These are rock-bottom yields, especially in this age of skyrocketing fuel costs," said Joseph Schwieterman, a DePaul University professor and former pricing analyst for United Airlines.
"In fairness to them, this is their first quarter, and the traffic growth has been quite impressive," Schwieterman continued. "But their costs may not allow selling so many seats at nominal prices. The (passenger numbers) are solid for a startup, but the publicity generated by the $10 fares isn't filling up the seats."
A number of airlines this summer were reporting planes that were 85 percent to 90 percent full on average. Since its launch, Skybus has sold at least 10 seats on every flight for $10 -- a price that the airline admits doesn't turn a profit but that's designed to gain publicity and stimulate demand.
Another industry consultant, Mike Boyd of the Evergreen, Colo.-based Boyd Group, called the yield numbers "appalling." Boyd, who has long said he didn't think the Skybus model would work, said yesterday that the figures prove his prediction.
"This is just not a very good plan, but that doesn't mean they can't turn it around by scrapping the model," Boyd said. "There are examples of airlines that changed plans. Frontier Airlines is now highly successful, for example. (Skybus officials) need to see they've got a problem on their hands and fix it if they want to be around in a year."
The Dispatch Printing Company, publisher of The Dispatch, owns a minority stake in Skybus.
selling yourself short will have an effect on generations to come. You might be thinking of your own situation but think about this. Was there a real need to redefine a new bottom at this time? I know that sometimes you have to take a job you don't really want, back on the last downturn of the industry (early 90's) I went down from a 727 to flying charters in light twins and I was one of the lucky ones. Is this really the same situations here? I wonder if Skumbus would have not gotten any takers at that salary rate, would they have not gotten on with the project? Or would have they re structure the salary rate closer to industry standards? They did it because they know that pilots will sell themselfs short. Not because they needed those salary rates to be able to do business. 
