I’ve seen a boatload of articles that note similarities between Skybus and Ryanair (their low fares and low frills being the obvious ones), but I thought it was important to mention that they are actually fundamentally different models. And this difference is why one makes money and the other likely will not.
Ryanair’s model has succeeded because their costs are low, of course, but also because they’ve built a network that of holiday and business destinations served by large cities across Europe. Ryanair has gained notoriety for flying to tertiary and generally unserved airports across Europe. But this misses a larger point: that they have built a series of bases across the Continent in large cities, allowing them to serve a large number of smaller cities from that base once or twice a day profitably. Ryanair’s bases include Rome, London, Madrid, Dusseldorf and others.
Skybus has one base in a mid-sized city trying to serve an assortment of primarily tertiary airports in business and holiday destinations. Most of these tertiary cities have neither the bus nor train infrastructure to bring passengers to the city center. Then once in the city, passengers need a car to get around (unlike in Europe, where many cities are well served by public transport).
On the cost front, Skybus has not been able to get costs anywhere near as low as Ryanair, meaning that they are unable to turn a profit when their revenues are also not where they need to be. Certainly, they’re getting hurt by high fuel costs; but so is Ryanair. It is the fundamental business — the single base in a mid-sized city, serving underdesired destinations. Imagine Ryanair with one base in Bologna, Italy. That’s the difference.
But all hope is not lost. Skybus is not a terrible idea; comparing it to Ryanair is a terrible idea. And in a bit of good news, they’ve started to make adjustments away from their original plan to make the airline look a bit more like…well, Allegiant. Allegiant (I’m a shareholder, for full disclosure) serves tertiary cities from Vegas, Tampa, Orlando and a few other leisure destinations. They serve these cities a handful of times a week in most cases, but they face roughly no competition. Even with their high cost aircraft, they’re profitable.
Skybus is going to announce that new flights from Chicopee, MA (serving Hartford-ish) and Richmond to St. Augustine, Florida, with Chicopee getting an additional flight to Punta Gorda, Florida. Skybus has already starting serving Florida from Portsmouth, NH, and Greensboro, NC. These routes have done well. And from these moves, you can see a route structure that looks like Allegiant…in a good way. There are plenty of destinations in Florida that are underserved, and Skybus is already flying to some of these. Taking the Ryanair strategy of flying to every little town in France that has a former Air Force base near it, Skybus can fly from unserved destinations in the northeast and midwest to unserved parts of Florida. The world does not need more flights from the northeast to Fort Lauderdale. But it could use 4-times a week service from Portsmouth to Punta Gorda.
Skybus is starting to move toward this strategy, and I commend them for it. They’ve also been quick to eliminate service when it’s not working (another Allegiant hallmark). There’s plenty of room for Allegiant and Skybus to co-exist. And if they listen to me, I’m pretty sure Skybus will thrive as well. (Note: sometimes it’s not a good idea to listen to me.)