03/09/10, 05:45:33 EDT

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Airline sells $10 flights

azcentral.com

Skybus Airlines Inc. started service today with some tickets as low as $10 for a four-hour flight across the U.S. The new carrier's goal is to charge even less.

"We're sort of embarrassed our fares are as high as $10," Chief Executive Officer Bill Diffenderffer said in an interview.

Closely held Skybus is betting it can mimic the success of Ryanair Holdings Plc, Europe's biggest discount airline, which routinely gives away tickets while charging fees for baggage and selling merchandise and ad space in cabins. Diffenderffer says fares initially will make up 85 percent of revenue at Columbus, Ohio-based Skybus, and the ratio will fall from there.

Skybus is "really pushing low-cost, self-service to the limit," said Alan Sbarra of San Francisco-based Roach & Sbarra Consulting. "But if the fare is low enough, I think people will do what it takes."

The carrier, which began flying with 14 jets, promises to sell at least 10 seats per flight for $10, with the rest costing at least "50 percent below whatever was prevailing in the market before," Diffenderffer said yesterday.

Like Dublin-based Ryanair, Skybus will fly to smaller airports that charge lower landing fees and are less congested. The airline's goal is to get planes airborne with a new load of passengers after just 25 minutes on the ground.


Smaller Airports
Service started today from Columbus to Kansas City, Missouri; Portsmouth, New Hampshire, near Boston; and Burbank, California, a Los Angeles suburb. Flights begin in the next week to Fort Lauderdale, Florida; Greensboro, North Carolina; Oakland, California; and Bellingham, Washington, 78 miles north of Seattle.

Skybus's leased Airbus SAS A319 jets can carry 144 passengers, and the 65 new models being delivered starting next year hold 156 seats. With one class of service, Skybus is able to expand beyond the plane's usual 124-seat configuration.

Travelers have to book tickets and communicate with Skybus entirely online, saving the airline money on staff. Skybus also will shave maintenance and training expense by flying only one type of plane, the A319, and by offering a simple route network that doesn't allow passengers to make transfers.

Priority boarding, checking luggage and buying drinks or food onboard all come with separate fees. Skybus flight attendants also peddle products such as perfume, and the carrier sells advertising space inside the plane and on the fuselage, where a full-body ad costs about $500,000 a year.


Watching
"Skybus is very Ryanairesque," Dan Garton, executive vice president of marketing at American Airlines, said in an interview. "We're watching that carefully, and the question is, 'Is that a direction we want to go?'"

AMR Corp.'s American, the world's biggest carrier by traffic, unveiled a new Web site yesterday enabling travelers to see what services are available at each fare level. Garton said fliers can now "assess the tradeoffs," a possible first step toward Skybus's fee-for-service model.

Diffenderffer said Skybus has sold "a couple hundred thousand" tickets since they became available on April 24 and will fill more than 80 percent of its seats in the first month.

Analysts including Sbarra say Skybus faces competition at its Columbus home base from established low-fare carriers Southwest Airlines Co. and JetBlue Airways Corp., both of which have said domestic demand is weakening. With jet fuel surging 26 percent this year, Skybus's costs will be pressured, too.

Skybus also is bucking the move by most U.S. discount carriers to behave more like traditional airlines, bundling food and entertainment within the ticket price, said Michael Boyd, president of consulting firm Boyd Group in Evergreen, Colorado.


They Ain't Ryanair'
"In the U.S., the trend in low-cost carriers is toward a higher-value proposition," Boyd said. "They ain't Ryanair and this ain't Europe."

Ryanair founder Tony Ryan and CEO Michael O'Leary modeled the Irish company after Southwest, the most profitable U.S. airline, when they started low-fare service in 1990 after operating charter flights. They've stripped even more frills since then, and O'Leary has said he expects to eventually stop charging for tickets and be profitable from ancillary revenue.

The carrier's success spawned dozens of imitators across Europe, where discount airlines have about 24 percent of the aviation market, almost a fivefold increase since 2001, according to the Official Airline Guide.

Skybus is "going after the Ryanair space" in the U.S., Diffenderffer said. His hires include Vice Chairman Charlie Clifton, who spent 15 years with Ryanair.

Skybus raised $160 million in start-up equity from backers including Morgan Stanley, Fidelity, Tiger Management and Nationwide Mutual Insurance Co., said Diffenderffer, a former chairman of travel distribution company XTRA On-Line. Skybus may sell shares to the public "in a couple of years," he said.

 Printable Version  | published May 22, 2007