BY KEITH BENMAN, Times of Northwest Indiana
kbenman@nwitimes.com
Skybus Airlines will have a tough battle succeeding in the crowded discount skies of Chicago and the nation, according to airline observers.
"I have my fingers crossed for them," said Roger King, a senior transportation analyst with New York-based CreditSights. "At the same time, I'm not jumping up and down over them."
On Wednesday, Skybus announced the March start-up of two daily flights from Gary/Chicago International Airport to Greensboro, N.C., with its $10 tickets for the first 10 seats on each flight.
King and others say Skybus will have to have more destinations from Gary and other cities than Greensboro. The airline currently operates with only two hubs, Greensboro and Columbus.
"No one will go to Greensboro for a week's vacation," King said.
Skybus does not sell connecting tickets out of its two hubs, which it prefers to call bases, as part of a package. It's up to the savvy traveler to purchase each ticket individually at the Skybus Web site, according to officials.
Gary airport officials on Wednesday stressed Skybus passengers flying out of Gary can connect with a host of cities, including Boston, New York, and New Orleans. Skybus serves all those through smaller nearby airports, as it is doing with Chicago at Gary.
"For the first time, we have an airline that connects Northwest Indiana to a focus city, providing multiple destinations for our community," Airport Director Chris Curry said, as he stood at the podium at the airport's administration building.
Skybus had unprecedented success in raising capital for its venture a year-and-a-half ago, extracting $160 million in backing from Wall Street investors, according to Chief Operating Officer Bud Sittig. It has placed an order in excess of $3 billion for 65 Airbus A319s. Delivery will start in 2009 and be complete by 2012.
But so far, the start-up is losing money. The airline had a $16 million loss in the first quarter on operating revenue of $22 million, according data filed with the U.S. Department of Transportation.
Sittig on Wednesday said the airline, which started flying in May, expected to lose money in its first year of operations. It expects to begin turning a profit in 2008.
He said the first 10 seats for $10 promotion had brought the airline untold publicity and reflected its overall philosophy of making travel available to whole new markets.
"It's time for a change in this industry," he said. " ... And we decided if we started an airline it had to be unique."
The airline sells seats under the typical "bucket" system of discount airlines, but the prices start much lower. After the first 10 seats are sold, seats go for about $35 and then up to $150 or so as the flight fills up.
Skybus would have started Gary flights sooner but did not want to go head-to-head with Southwest Airlines, which has flights from Columbus to Midway, Sittig said. The opening of Skybus' second hub in Greensboro made Gary/Chicago possible, Sittig said.
Still, many observers are rolling their eyes both at Skybus' ultra-discount model and the large amounts it has raised on Wall Street.
"It's a loser," said Michael Boyd, of the Boyd Group Inc., an aviation consulting firm in Evergreen, Colo. "I just don't think it's gonna work."
The airline's potential earnings from charging $2 for a Pepsi and $5 to check baggage on Skybus flights won't make up for the ultra-low prices on flights, Boyd said. He noted even with those hefty charges for standard amenities, the airline's cost per passenger seat mile is not much less than airlines like Southwest.
"It all sounds great, but I'm not sure it's going to work long-term," Boyd said.