Skybusted

When Skybus Airlines, the nation's first ultra-low-cost carrier, announced this week that it was filing for bankruptcy and immediately terminating its service, some surprised passengers were left stranded without notice.
by | April 8, 2008

Skybus When Skybus Airlines, the nation's first ultra-low-cost carrier, announced this week that it was filing for bankruptcy and immediately terminating its service, some surprised passengers were left stranded without notice.

It's not just the fliers who were left in a lurch. Skybus' termination leaves many U.S. cities high and dry -- cities that had been banking on the low-cost carrier to transform air service in their region. Skybus was built, in no small part, on incentives from states and localities. Now those places are left wondering whether it was all worth it.

Yes, several cities gambled on Skybus and lost. But just because this company failed, that doesn't mean there's no place in this country for a low-cost, no-frills airline just like it.

Skybus, whose first flight took off only last May, was the first American airline to import the business model of Ryanair, the extremely successful low-cost European carrier.

That meant super-low fares -- tickets on every Skybus flight started at just $10 -- and stripped-down amenities. The airline charged a la carte fees for checking a bag or reserving priority seating. Passengers had to pay for pillows, blankets, even food and sodas -- and you weren't allowed to bring you own onto the plane. Flight attendants walked through the cabin hawking duty-free perfume, jewelry and backpacks, and they earned a commission for every item they sold. The airline sold advertising space in the cabins and on the side of its planes. You could even pay to sponsor the in-flight announcements.

But it wasn't stripped-down service. When I took a Skybus flight last month, from Wilmington, Delaware, to Greensboro, North Carolina, I was surprised by how nice the experience was. The flight was punctual; the plane was spotless and surprisingly spacious; the flight crew was personable and friendly.

And I've never encountered passengers more excited about their flight. Perfect strangers were giddily comparing how much they'd paid for their tickets. And I heard several Skybus fliers explaining the airline's low-cost model to other airport passengers who curiously approached the gate.

Like Ryanair, Skybus mostly flew into mid-sized cities on the periphery of larger urban areas -- where airport landing fees are cheaper, and the airports are more willing to cut a deal with a new carrier. The airline's "Boston" flight actually landed in Portsmouth, New Hampshire, more than 50 miles away. Flying to "New York City" actually landed you in the town of Newburgh, more than 70 miles from Manhattan. Rather than flying to New Orleans, Skybus landed at the Gulfport-Biloxi International Airport, nearly 75 miles from the Crescent City.

But for these cities and many more like them, Skybus service was a big deal. At the airports in Gary, Indiana; and Charlotte County in south Florida; Skybus offered the first commercial service in years.

And some cities fought hard to attract the airline.  Columbus, Ohio, where Skybus was headquartered, offered $14 million in tax credits and incentives. The Columbus airport pitched in with another $27 million. Added enticements from the state boosted Skybus' package to $57 million. Columbus expected Skybus would create 1,000 new jobs in the region.

Greensboro also offered Skybus a very generous incentive package. The airport there agreed to $6.3 million in immediate terminal improvements -- plus an additional $40 million in enhancements if the airline brought in enough passengers. On top of that, the airport agreed to pay Skybus $2.15 for each passenger it carried out of Greensboro, a subsidy that sometimes exceeded $300 per flight. The state of North Carolina chipped in with another $3.9 million in job development grants to the company, which was projected to bring 375 new jobs to the area. Last fall, Skybus chose Greensboro as its second "focus city."

While some people are saying the demise of Skybus proves the airline's model was unworkable from the start, it's wrong to rule out the success of a Ryanair-style carrier in the States. Skybus was done in by bad timing -- record-high oil prices make for a bad time to start a new carrier. But I do believe there is a place for such an airline in the U.S.

And cities shouldn't be discouraged, either. True, some of them went out on a limb and lost some money. But the vast majority of the incentives offered to Skybus were tied to the airline's performance and the jobs it brought in. In Greensboro, for instance, the airport says it's been able to recoup all but $40,000 of the money it had set aside for Skybus.

And there's even the possibility that Skybus itself could rise from the bankruptcy ashes. The company's founder says he's working on a way to revive the airline.

Maybe that will happen. But even if it doesn't, cities shouldn't look at the Skybus story as a death-knell for the deep-discount Ryanair model in the U.S.

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