Post by Gay Titan on Apr 5, 2008 17:53:04 GMT
By Marla Matzer Rose/THE COLUMBUS DISPATCH
Just over 10 months after its heralded takeoff at Port Columbus, the airline that became famous for its $10 fares said yesterday that it has quit flying as of today.
The decision, made after a board meeting yesterday, left hundreds of Skybus ticketholders stranded and its 450 employees out of work.
The company has lost millions of dollars and plans to file for Chapter 11 bankruptcy protection on Monday. Its chief executive, Bill Diffenderffer, resigned nearly two weeks ago.
Skybus workers were stunned by the news yesterday.
About a dozen employees gathered at the Skybus ticket counter, some taking pictures. Some were upset and crying, asking each other what they plan to do. Workers from other airlines came up to wish them well and tell them they will be missed.
The company's new CEO, Mike Hodge, blamed rising oil prices and a slowing economy for the abrupt shutdown.
"We deeply regret this decision and the impact this will have on our employees and their families, our customers, our vendors and other partners, and the communities in which we have been operating," Hodge said in a statement. "Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment. These two issues proved to be insurmountable for a new carrier."
Port Columbus invested millions in terminal improvements tailored to the Columbus-based airline, and has profited from its growth.
David Whitaker, vice president of business development at Port Columbus, said the loss of Skybus will certainly present a short-term setback.
"Our (passenger) numbers swelled when Skybus came in. The market will retract accordingly without them here," Whitaker said.
Skybus' presence has been cited as the reason several airlines dropped service from Port Columbus. JetBlue Airways left altogether, and Delta Air Lines and Midwest Airlines both cut routes to markets that Skybus also served.
The failure of Skybus is "not a reflection on the market itself … it's a difficult economic condition," Whitaker said. But he added: "Certainly, it's something other carriers will ask us about when they're looking at Columbus as a potential market. It's something we'll have to explain." At least two industry experts, though, said Skybus' problems were there from the beginning.
"It was a weak business model to begin with," said Nawal Taneja, head of the aviation department at Ohio State University. "The fact is, the economy tends to hurt high-fare airlines, not low-fare ones. Their fares and cost structure were out of line… Fuel prices rising is the type of thing you have to factor in when you do your risk analysis. If you didn't do that, then your management was very weak from the start."
Mike Boyd of the Colorado-based Boyd Group also has been a critic of the Skybus model, but he expressed surprise at the swiftness of the airline's demise.
"They had a dumb model. The original plan never had a chance, at $50-a-barrel oil or $100-a-barrel oil," he said. "But I really thought someone could come in and turn it around. The pressures on airlines today are very different than they have been in the past. They're shutting down suddenly now to preserve whatever assets they have for the creditors."
Fidelity and Morgan Stanley, two of the biggest investors in the $160 million startup, have representatives on the Skybus board. Fidelity holds about 12.6 percent of the privately held company's stock; Morgan Stanley, 6.4 percent. Nationwide Mutual Capital was the biggest local investor, with a 5 percent share.
Battelle, Huntington Capital Investment Co. and Wolfe Enterprises Inc., a subsidiary of The Dispatch Printing Company, were among the local entities that contributed the original seed money for the airline. The airline was also granted $57 million in state and local incentives, although most came in the form of such things as tax breaks and airport improvements.
Skybus founder John S. Weikle, who had tried unsuccessfully to start another airline in Dayton, approached Port Columbus leaders soon after America West announced it was pulling its hub in the city in early 2003.
Sandwiched between the major hub cities of Cleveland and Cincinnati, Columbus has long struggled to maintain consistent nonstop service to key destinations outside other hub cities such as New York and Chicago. Business and community leaders hoped that as the "hometown airline," Skybus would buffer Columbus somewhat from the vagaries of the industry.
Skybus got off to a strong start last summer, bringing tens of thousands more passengers through Port Columbus. In turn, the airport added parking spaces and raked in millions in additional parking revenue as it reached an all-time record passenger count of more than 7.7 million for 2007.
But Skybus hit a rough patch during the winter. With a very short window between flights and a crush of flights all leaving within an hour of each other first thing in the morning, dealing with ice and snow took its toll on on-time performance. The airline had to cancel more than a dozen flights Christmas Day and the day after, when two of its seven planes went out of commission as a result of mechanical problems.
Poor performance coupled with a lack of customer service took its toll. Passenger numbers dropped in the slow months of January and February, as the airline struggled to build up its new base in Greensboro, N.C. Route cuts last month were quickly followed by the replacement of the CEO by former Chief Financial Officer Hodge, who was charged with improving performance and stemming losses.
But it was apparently too little, too late to turn the airline around.
Just over 10 months after its heralded takeoff at Port Columbus, the airline that became famous for its $10 fares said yesterday that it has quit flying as of today.
The decision, made after a board meeting yesterday, left hundreds of Skybus ticketholders stranded and its 450 employees out of work.
The company has lost millions of dollars and plans to file for Chapter 11 bankruptcy protection on Monday. Its chief executive, Bill Diffenderffer, resigned nearly two weeks ago.
Skybus workers were stunned by the news yesterday.
About a dozen employees gathered at the Skybus ticket counter, some taking pictures. Some were upset and crying, asking each other what they plan to do. Workers from other airlines came up to wish them well and tell them they will be missed.
The company's new CEO, Mike Hodge, blamed rising oil prices and a slowing economy for the abrupt shutdown.
"We deeply regret this decision and the impact this will have on our employees and their families, our customers, our vendors and other partners, and the communities in which we have been operating," Hodge said in a statement. "Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment. These two issues proved to be insurmountable for a new carrier."
Port Columbus invested millions in terminal improvements tailored to the Columbus-based airline, and has profited from its growth.
David Whitaker, vice president of business development at Port Columbus, said the loss of Skybus will certainly present a short-term setback.
"Our (passenger) numbers swelled when Skybus came in. The market will retract accordingly without them here," Whitaker said.
Skybus' presence has been cited as the reason several airlines dropped service from Port Columbus. JetBlue Airways left altogether, and Delta Air Lines and Midwest Airlines both cut routes to markets that Skybus also served.
The failure of Skybus is "not a reflection on the market itself … it's a difficult economic condition," Whitaker said. But he added: "Certainly, it's something other carriers will ask us about when they're looking at Columbus as a potential market. It's something we'll have to explain." At least two industry experts, though, said Skybus' problems were there from the beginning.
"It was a weak business model to begin with," said Nawal Taneja, head of the aviation department at Ohio State University. "The fact is, the economy tends to hurt high-fare airlines, not low-fare ones. Their fares and cost structure were out of line… Fuel prices rising is the type of thing you have to factor in when you do your risk analysis. If you didn't do that, then your management was very weak from the start."
Mike Boyd of the Colorado-based Boyd Group also has been a critic of the Skybus model, but he expressed surprise at the swiftness of the airline's demise.
"They had a dumb model. The original plan never had a chance, at $50-a-barrel oil or $100-a-barrel oil," he said. "But I really thought someone could come in and turn it around. The pressures on airlines today are very different than they have been in the past. They're shutting down suddenly now to preserve whatever assets they have for the creditors."
Fidelity and Morgan Stanley, two of the biggest investors in the $160 million startup, have representatives on the Skybus board. Fidelity holds about 12.6 percent of the privately held company's stock; Morgan Stanley, 6.4 percent. Nationwide Mutual Capital was the biggest local investor, with a 5 percent share.
Battelle, Huntington Capital Investment Co. and Wolfe Enterprises Inc., a subsidiary of The Dispatch Printing Company, were among the local entities that contributed the original seed money for the airline. The airline was also granted $57 million in state and local incentives, although most came in the form of such things as tax breaks and airport improvements.
Skybus founder John S. Weikle, who had tried unsuccessfully to start another airline in Dayton, approached Port Columbus leaders soon after America West announced it was pulling its hub in the city in early 2003.
Sandwiched between the major hub cities of Cleveland and Cincinnati, Columbus has long struggled to maintain consistent nonstop service to key destinations outside other hub cities such as New York and Chicago. Business and community leaders hoped that as the "hometown airline," Skybus would buffer Columbus somewhat from the vagaries of the industry.
Skybus got off to a strong start last summer, bringing tens of thousands more passengers through Port Columbus. In turn, the airport added parking spaces and raked in millions in additional parking revenue as it reached an all-time record passenger count of more than 7.7 million for 2007.
But Skybus hit a rough patch during the winter. With a very short window between flights and a crush of flights all leaving within an hour of each other first thing in the morning, dealing with ice and snow took its toll on on-time performance. The airline had to cancel more than a dozen flights Christmas Day and the day after, when two of its seven planes went out of commission as a result of mechanical problems.
Poor performance coupled with a lack of customer service took its toll. Passenger numbers dropped in the slow months of January and February, as the airline struggled to build up its new base in Greensboro, N.C. Route cuts last month were quickly followed by the replacement of the CEO by former Chief Financial Officer Hodge, who was charged with improving performance and stemming losses.
But it was apparently too little, too late to turn the airline around.
Or trying to, anyway.