(First off, let me say that I know this news came out a couple of weeks ago, but it was the holidays, blah blah blah, so I’m writing about it now. Sue me.)
We should certainly never write off an airline (or a candidate) based on their initial numbers, so I’m not at all suggesting that Skybus does not have a long-term healthy future. They may. But they won’t if they continue to report numbers like this: In their first quarter, their passenger yield – roughly their revenue per mile flown – was 5.08 cents. Southwest, by comparison, is about 12 cents and change. One analyst called the revenue numbers "appalling." That may have been generous.
Their launch yesterday of Wilmington, Delaware, an airport that no airline has been able to make work, (as well as Gary, Indiana – another airport no airline has been able to succeed at), puts them right in the path of Southwest, which is offering $59 fares from Philadelphia to Columbus, while Skybus has fares in the $25-55 range from Wilmington to Columbus. Will people be willing to be inconvenienced for $25? Not sure. And if their current pricing mix is bringing in such horrible yields, they’ll have to raise fares, which, of course, will take away the advantage of flying to a far-flung airport.
Their costs – reportedly 7.8 cents per seat mile, are not nearly low enough to make this work long-term. They’ve already started fixing some of that by reducing long-haul flying. Again, they have a lot of cash, so they’re not going anywhere. But those insanely low yields are a serious issue.