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Skybus’ Miserable Revenue Situation

(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.

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  1. Frank Oglethorpe

    Interesting what you say as I find it curious that for well over a month now since May hasbeen available they have not opened up their bookings for June. Hence I’m looking at other carriers and at thesame time wondering if there willbe a Skybus after May?

  2. I remember the good ol’ days when posts on OTR were funny and/or short and/or uncomplicated (like this sentence).

  3. Not all their airports are dogs. The Wilmington, DE airport MIGHT actually be able to support service, as there are at least a half million people who live closer to Wilmington than they do to Philly. And Philly’s not a great airport — in contrast to Wilmington, where there’s plenty of free parking and minimal hassles.

    The problem is that you have to fly to places that people want to go. I doubt many Wilmingtonians want to go to Greensboro or Columbus. And Skybus offers no connections, so those are their choices. Kind of the same problem Continental had when they offered their “lite” service to Greensboro: it was service nobody was interested in.

  4. Seems smart not to sell too far into the future, this way they can adjust pricing if spot fuel increases.

  5. There seems to be a rush to write off Skybus and their business model. Despite the sucess of the same model in Europe.

    I don’t think any reasonable person would expect a startup airline to be profitable in it’s first quarter.

  6. We have booked a few flights from Ft. Lauderdale to Greensboro this winter. What a great way for us to go skiing more than once during the season. I am getting a little obsessive about watching fares for June though. It is like waiting for a Red Ryder BB gun on Christmas.

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