How Bad Is $16M Loss For Skybus

billreid · Wed Dec 19, 2007 3:28 am

SX reported a $16M loss during the third quarter on a load factor of 79%. Yield was reported at a "apalling" 5.08 cents versus a 12.5 cents on WN. The loss does not mention any start-up write offs but is their operational loss.

Michael Boyd said SX could turn it around if they entirely scrap the business plan.
The reported casm was a very dissapointing 7.80cents which places SX well beyond the ultra-lowcost model they have been touting.

Based upon the loss on a 78% load factor, it is highly likely that SX will lose double this amount in the weaker 4th, 1st and 2nd quarters in a higher priced fuel environment. If the losses grow they could lose over $50M in their first two quarters and burn through near $120MM before they reach the stronger third quarter again. If they then repeated the same results in Q3 they would be left with an empty bank.

Is it time to rethink the business plan?

If you are pro or con SX chime in.

FreequentFlier · Wed Dec 19, 2007 3:36 am

My guess is that it ultimately will not work, but as a niche carrier, it could have some success. SX seems to have dreams of developing multiple focus cities throughout the US, but that is doomed to failure. If they stay small on certain niche routes where the market is large enough to attract people flying into alternative airports, they stand a chance. But as the current business model stands, they're going to hit a lot of headwinds.

masseybrown · Wed Dec 19, 2007 5:27 am

Quoting BillReid (Thread starter):
Yield was reported at a "apalling" 5.08 cents

They cannot survive at that yield. They are making the same mistake FlyI did: underpricing their product.

Cubsrule · Wed Dec 19, 2007 5:30 am

Let's assume the other thread is gone and not returning...

Quoting BillReid (Thread starter):
The reported casm was a very dissapointing 7.80cents which places SX well beyond the ultra-lowcost model they have been touting.

One thing that is worrisome about this number is the fact that SX has apparently acknowledged that it needs to focus more on short- to medium-haul flying in order to succeed. The problem is that this will raise CASM. Now, maybe that's all right, as it also raises RASM (WN makes more money per mile on a $29 STL-MDW trip than on a $99 LAX-MDW trip, but we call both "low fares"). But when your CASM is 40% higher than your RASM to begin with, your RASM needs to increase at a much faster rate than your CASM in order to catch up.

CMHSRQ · Wed Dec 19, 2007 3:04 pm

Where did the other thread go?

VX better change their plan as well. They had the same revenue, but costs were significantly higher with a loss of 38million.

juventus · Wed Dec 19, 2007 3:06 pm

I'm not a fan of this airline at all. They're the "Mesa" of LCCs. They've taken what little prestige was left in flying, and completely killed it. They charge Greyhound fares in a pathetic attempt to steal away passengers. No simpathy from me.

Back to the topic, I don't think its going to work unless they raise their fares. Second, how much O&D traffic can they get out of Columbus, and now Greensboro???

masseybrown · Wed Dec 19, 2007 3:16 pm

Quoting Juventus (Reply 5):
They're the "Mesa" of LCCs.

Unfair. Skybus's CEO is not a felon.

EXAAUADL · Wed Dec 19, 2007 3:22 pm

Here is what they need to do:

Scrap the long haul west coast flights and close those stations.

Drop routes like CMH-CHA, CMH-RIC, no one will fly between those cities and pay enough to make them profitable.

Fly to more of Florida from CMH and GSO (PIE, SFB, etc)

In some larger markets like SFB or PIE they can fly more than one daily trip.

Since their yields are so low, they likely are pricing along the inelastic portion of the demand curve for their customers. Hopefully they can raise fares $25 to $50 dollars and not lose a lot of traffic.

I think if they become a Allegiant clone, flying to Flordia from CMH, GSO and another couple of cities, they can make it work. But one flight a day to places no one wants to fly to ie (CMH-CHA) wont work

EXAAUADL · Wed Dec 19, 2007 3:24 pm

Quoting Cubsrule (Reply 3):
The reported casm was a very dissapointing 7.80cents which places SX well beyond the ultra-lowcost model they have been touting.

There might be some start up costs there, but having one daily flight into a city, is very high cost because all the station costs fall on that one flight.

EXAAUADL · Wed Dec 19, 2007 3:25 pm

Quoting MasseyBrown (Reply 6):
Unfair. Skybus's CEO is not a felon.

what was Orenstein convicted of?

isitsafenow · Wed Dec 19, 2007 3:28 pm

To answer the Q, a 16 million $ loss with an airline with a 100 airplane fleet is tolerable. A 16 million $ loss with an
airline with a small fleet like Skybus......well, lets say the yellow light is on and glowing brightly.
safe redflag

EXAAUADL · Wed Dec 19, 2007 3:33 pm

How big is Skybus fleet?

bravogolf · Wed Dec 19, 2007 3:35 pm

Quoting CMHSRQ (Reply 4):
Where did the other thread go?

Moderators Where is the original thread???

luv2fly · Wed Dec 19, 2007 5:04 pm

Well they can start charging more for items on board though $2.00 for a can of coke is a tad high though. And certain people have repeatedly said that the onboard sales are higher then expected, though we do not know what if anything was expected.

burnsie28 · Wed Dec 19, 2007 5:07 pm

Quoting MasseyBrown (Reply 2):
underpricing their product.

What product?

Anyway, its not looking good for skybus, the only people I feel bad for are the pilots, the FA's can easily get jobs elsewhere, most of the gate agents were just moms looking for something to do. I figured this airline wouldn't last but hey, they lost a heck of a lot less then Virgin America did for a whole quarter compared to just 3 months.

sacamojus · Wed Dec 19, 2007 5:13 pm

They are the Wal-Mart of the skies. Look at where Wal-Mart is today. As long as they have enough cash to survive until they go so large that their cost begin to decrease, watch out. I see Skybus staying around for a very long time.

flyCMH · Wed Dec 19, 2007 5:24 pm

Quoting Sacamojus (Reply 15):
They are the Wal-Mart of the skies. Look at where Wal-Mart is today. As long as they have enough cash to survive until they go so large that their cost begin to decrease, watch out. I see Skybus staying around for a very long time.

Southwest is the Wal*Mart of the skies. Skybus is the $0.99 Store of the skies.

FlyASAGuy2005 · Wed Dec 19, 2007 5:31 pm

Quoting Isitsafenow (Reply 10):
To answer the Q, a 16 million $ loss with an airline with a 100 airplane fleet is tolerable. A 16 million $ loss with an
airline with a small fleet like Skybus......well, lets say the yellow light is on and glowing brightly.
safe

True. Just as an example, loo at what Delta was loosing a few years ago! Remember that one quarter when they lost something like $5.2(5.4) BILLION!!! I honestly didn't think they had ANYTHING left. They were literally living paycheck tp paycheck if you will; just waiting for credit card reciepts to go through.

Quoting Burnsie28 (Reply 14):
hey, they lost a heck of a lot less then Virgin America did for a whole quarter compared to just 3 months.

A quarter is 3 months.

Quoting Sacamojus (Reply 15):
They are the Wal-Mart of the skies. Look at where Wal-Mart is today. As long as they have enough cash to survive until they go so large that their cost begin to decrease, watch out. I see Skybus staying around for a very long time.

I don't know about all of that. Do you really think Skybus can rise to the likes of AA as being the largest? (only use that comparison because Wal-Mart is the largest retailer). Although, Wal-Mart actually makes money. Being large isn't necessarily the greatest thing in the airline industry. Look at today's market. Everyone for the most part is strinking to try and get to a point of where they are actually making money. It may be pretty and glitsy to boast the largest fleet, but if half of your planes is always flying empty then we have a problem.

ikramerica · Wed Dec 19, 2007 5:38 pm

Quoting FlyASAGuy2005 (Reply 17):
Although, Wal-Mart actually makes money.

Ding.
They made money when they were just one store in Arkansas, then expanded and made money each time. That used to be how business worked. Start, try to make money, make money, expand.

In 90s and 2000s, it seems that there is enough stupid money out there to buy into this model: start, plan to lose money, plan to expand and lose more money, expand again in an effort to finally make money, collapse...

ScottB · Wed Dec 19, 2007 5:43 pm

Quoting BillReid (Thread starter):
If the losses grow they could lose over $50M in their first two quarters and burn through near $120MM before they reach the stronger third quarter again.

The company's balance sheet showed $79.5 million in cash as of the end of Q3. By looking at retained earnings on the balance sheet, it also appears that they have cumulatively burned through $60 million of their $158 million in paid-in capital (i.e. what investors contributed to back the airline) since starting up.

Quoting EXAAUADL (Reply 7):
Drop routes like CMH-CHA, CMH-RIC, no one will fly between those cities and pay enough to make them profitable.

Fly to more of Florida from CMH and GSO (PIE, SFB, etc)

And fly more routes to Florida from PSM, SWF, etc. You're also more likely to sell food, drink, and trinkets on flights which are over two hours or so in length. If your business targets leisure travelers, you need to fly where leisure travelers want to go.

Quoting Sacamojus (Reply 15):
As long as they have enough cash to survive until they go so large that their cost begin to decrease, watch out. I see Skybus staying around for a very long time.

Except they don't have all that much cash. FlyI had $300 million in cash & securities at the start of 2004 and went out of business in under 25 months. Now, to be fair, Skybus's operating margins (-35%) aren't quite as bad as FlyI's were, but the fundamental problem is still the same -- RASM that is significantly lower than CASM.

FlyASAGuy2005 · Wed Dec 19, 2007 5:57 pm

Quoting ScottB (Reply 19):
Except they don't have all that much cash. FlyI had $300 million in cash & securities at the start of 2004 and went out of business in under 25 months. Now, to be fair, Skybus's operating margins (-35%) aren't quite as bad as FlyI's were, but the fundamental problem is still the same -- RASM that is significantly lower than CASM.

This might get very ugly for them is they don't change their business plan quick. (hasn't it already) Through all the lists of Skybus threads on here, and there were those that supported them, and those that gave them a 2 year life expectancy. Who's right? Is it still two early?

KarlB737 · Wed Dec 19, 2007 6:07 pm

Apparently they expected this kind of loss in the beginning.

"Company officials said they expected to lose money before becoming profitable sometime next year, while some analysts said this first look provided some troubling signs for the airline."

Courtesy: The Columbus Dispatch

Skybus In The Red By $16 Million - 2 Pages

http://www.airportbusiness.com/onlin...article.jsp?siteSection=1&id=16355

[Edited 2007-12-19 10:09:24]

ikramerica · Wed Dec 19, 2007 6:11 pm

Quoting FlyASAGuy2005 (Reply 20):
Through all the lists of Skybus threads on here, and there were those that supported them, and those that gave them a 2 year life expectancy.

They'll get 2 years if the silly investors put in more millions to keep them afloat.

What I found funny were the people who said "see, all the naysayers said blah blah blah, but they are flying!" about VX and SkyBus, as if taking to the skies on day one was proof that the business models made sense. Anyone can buy a few planes and put them in the air. It's keeping them there that's hard.

So far, there still is no proof either can do that, though i think VX has a better chance.

The real loser would be Columbus, which is losing mainline service from everyone else and paid millions in improvements and concessions to SkyBus. When they collapse, CMH loses out, though I assume, Wal-Mart, I mean WN will step in and fill in some of the gaps... Wink

FlyASAGuy2005 · Wed Dec 19, 2007 6:32 pm

Quoting Ikramerica (Reply 22):
The real loser would be Columbus, which is losing mainline service from everyone else and paid millions in improvements and concessions to SkyBus. When they collapse, CMH loses out, though I assume, Wal-Mart, I mean WN will step in and fill in some of the gaps...

A shame what Delta has turned CMH into. Think they'll try to make a comback? Or even better, position themselves against Skybus so they if they fall, they can pick up the peices and seem to be the savior to the travelers and win back some loyalty.

clickhappy · Wed Dec 19, 2007 6:33 pm

What of recent rumors of a Skybus IPO, how does this news affect that?

Also - on a side note, wasn't there a guy on here always defending SX, asking us if we had "ever seen their financial data?"

Well, we have seen it now. Would be interesting to get his take on it.

FlyASAGuy2005 · Wed Dec 19, 2007 6:51 pm

Quoting Clickhappy (Reply 24):
Also - on a side note, wasn't there a guy on here always defending SX, asking us if we had "ever seen their financial data?"

Well, we have seen it now. Would be interesting to get his take on it.

LOL! I think he'll wait for the 3rd quarter before he comes out of the wood work. Seriously though, i'm not really a Skybus fan, or an LCC fan for that matter, although I wish them luck for the sake of their employees but I too, would still like to see where they are at 9 months from now.

pitpirate · Wed Dec 19, 2007 7:02 pm

Does anyone here believe that the success of Allegiant can be attributed to the fleet they fly - used MD's vs brand new Airbus's? If you are doing an airline startup, wouldn't it be cheaper to go after a used model of same type aircraft that would be readily available than obtaining new aircraft? I don't know what that monthly nut is on those new Airbus aircraft, but it has got to be more expensive than a used aircraft.

Any replies are greatly welcomed and I am not trying to start a controversy here, just looking for some answers.

Thank You,

Pirate

ikramerica · Wed Dec 19, 2007 7:14 pm

Quoting PITPirate (Reply 26):
Does anyone here believe that the success of Allegiant can be attributed to the fleet they fly - used MD's vs brand new Airbus's?

Not sure. Plenty of failed airlines started with used airliners.

But there was a real shift in the startup business since Airbus started making deals for large fleets of A320s at low prices to anybody with a fat check book. It used to be that these startups didn't get good deals, only the 'big boys' did, because an airframe maker doesn't want to risk it's order book and future cash flow on lots of airlines with a high likelihood of failure. But between B6 and the great price 'small fry' F9 got that made them ditch their Boeing deal, that concept changed, and every startup and it's brother has started ordering fleets of A320s, and now 737NGs.

Even EasyJet and Ryanair started small, with used/wetleased aircraft, and grew slowly at first.

FlyASAGuy2005 · Wed Dec 19, 2007 7:14 pm

Quoting PITPirate (Reply 26):
Does anyone here believe that the success of Allegiant can be attributed to the fleet they fly - used MD's vs brand new Airbus's? If you are doing an airline startup, wouldn't it be cheaper to go after a used model of same type aircraft that would be readily available than obtaining new aircraft? I don't know what that monthly nut is on those new Airbus aircraft, but it has got to be more expensive than a used aircraft.

Believe it or not, used RELIABLE aircraft are hard to come by. In today's time's airlines are, for the most part, holding on to their fleet (in America at least). So let's see, what are your options? We have a lot of MD's sitting in the desert (most very aged and not with upgrades of the newer versions), no 757's are to be had right now, although Delta was very strategic and quite lucky in their deal, A319s that are getting past their prime, most of the older ones sitting in the desert waiting for an owner that will never come. What's left. As far as leasing a newer aircraft vice an old one, sometimes the cost differences isn't all that different. But hey, i'm not an expert, just my thoughts on the subject.

BrianDromey · Wed Dec 19, 2007 7:31 pm

Quoting PITPirate (Reply 26):
If you are doing an airline startup, wouldn't it be cheaper to go after a used model of same type aircraft that would be readily available than obtaining new aircraft? I don't know what that monthly nut is on those new Airbus aircraft, but it has got to be more expensive than a used aircraft.

They are getting aircraft on a sub-lease from VX, so those birds are probably not cheap. I think it is a bit early to write off SX yet, I think.

The SX model can work, if it does in Europe, it can in the US. Consumers are only after one thing...low fares. They could not care less about legroom and delays, the paint job on the aircraft or the customer service. Believe it or not most consumers could not care less how much the crew are being paid, so long as they get there in one piece. If consumers did care about all these things, FR would long be gone. FR had an advantage in being able to refine their model over two decades, and they were able to "train" customers bit by bit. SX is jumping in at the deep-end, so it may take a while to get used to the new landscape. Sadly the US carriers have dumped almost all levels of "service" so carriers like B6 and VX who have a USP other than price(and a strong FFP) might have an advantage here.

Brian.

FlyASAGuy2005 · Wed Dec 19, 2007 7:55 pm

Quoting BrianDromey (Reply 29):
The SX model can work, if it does in Europe, it can in the US. Consumers are only after one thing...low fares.

Quoting BrianDromey (Reply 29):
Believe it or not most consumers could not care less how much the crew are being paid, so long as they get there in one piece. If consumers did care about all these things, FR would long be gone.

This is all fine and dandy. I totally agree actually! Most travelers do not care. They go to travelocity and pick the airline near the top of the list that meets their timing needs. BUT, if these low fares and droves of passengers cannot support your operation, you still fail.

[Edited 2007-12-19 11:55:52]

ikramerica · Wed Dec 19, 2007 8:23 pm

Quoting BrianDromey (Reply 29):
The SX model can work, if it does in Europe, it can in the US. Consumers are only after one thing...low fares.

There is no truth to the idea that just because something works in the USA it can in the EU and vice versa. When Ryan and Easy and such were getting going, the EU was still struggling with spiltting out their state owned airlines into private companies, and had created a situation where most nations only had one airline which only wanted to connect to major cities in other countries and see itself as an international powerhouse. There was room for these LCCs to come in and do what the big boys were unwilling to do. Further, those state carriers were charging unreasonable fares.

Not true in the USA. These LCCs can start by finding the few routes not covered by other carriers, but once they want to grow, they just duplicate other routes, often covered by multiple carriers. Our country is well covered. Any new carrier has to stand out by price or by product. And if you stand out by price, you better have a model that can support your price. SkyBus can't so far. With 80% load factors they are losing tons of money. That's bad, because it means they are filling those seats with losses.

But to compete with price as the attractor, how can they raise prices and still offer such a bad product compared to other carriers and expect to attract customers? There are only so many CMH customers to go around.

flyinryan99 · Wed Dec 19, 2007 8:28 pm

I'm curious because I don't know. What is Ryanair's yield? If they are trying to be like Ryanair, then yeilds should be comparable right?

I still have a few questions about the 5.08 yield. Does this include just the fares or all of the revenue collected per passenger? If it includes all revenues per passenger then something will need to change. My guess is they will probably increase fares by $10 one way starting into the summer '08 season.

I won't count them out yet. I would still love to see them fly a few trips out of TOL to some of their stations Big grin

Cubsrule · Wed Dec 19, 2007 8:32 pm

Quoting Ikramerica (Reply 31):
There is no truth to the idea that just because something works in the USA it can in the EU and vice versa.

Agreed. FR also did not have to deal with the fact that WN set the bar much higher for LCCs in this country. For most Europeans, FR defined what an LCC is. WN did that for most Americans, and did so in a way largely incompatible with what SX does.

masseybrown · Wed Dec 19, 2007 8:41 pm

Quoting EXAAUADL (Reply 9):
what was Orenstein convicted of?

Several specifications of securities fraud.

FRNT787 · Wed Dec 19, 2007 9:07 pm

Quoting BrianDromey (Reply 29):
They are getting aircraft on a sub-lease from VX, so those birds are probably not cheap. I think it is a bit early to write off SX yet, I think.

They also will have start taking deliveries on 60 A319s (Or Airbus will have to give those slots to another airline, which shouldnt be difficult).

ScottB · Wed Dec 19, 2007 9:10 pm

Quoting BrianDromey (Reply 29):
Consumers are only after one thing...low fares. They could not care less about legroom and delays, the paint job on the aircraft or the customer service. Believe it or not most consumers could not care less how much the crew are being paid, so long as they get there in one piece.

Much of this is true, but passengers also want to travel from somewhat near the place they live to somewhat near their intended destination. Sure, PSM can work as an alternate to BOS/PWM/MHT, but there aren't that many people who want to go to and from Columbus or Greensboro. Markets like PVD/MHT-BWI work well because there are many, many people who travel between the Boston area and the Washington/Baltimore area.

Quoting BrianDromey (Reply 29):
The SX model can work, if it does in Europe, it can in the US.

Europe's airline industry still remains far more regulated than in the United States. Tight slot restrictions at many key airports have meant that LCC's have been forced to use alternate airports simply to fly at all. Government policy in the U.S. has been aimed at facilitating the success of LCC's -- with new entrants being granted slots at the handful of slot-restricted airports, as well as airports being forced to make facilities available to all comers, if possible. In Europe, it seems slots and terminal facilities have been used as excuses to squeeze out LCC's where they might have competed with the former national carriers.

Quoting PITPirate (Reply 26):
Does anyone here believe that the success of Allegiant can be attributed to the fleet they fly - used MD's vs brand new Airbus's?

Well, it is due to that in part -- but essentially because they don't have to strive for high utilization given relatively low capital and/or leasing costs for the planes. It's OK for them to park most of their fleet on Tuesdays simply because the depreciation/lease costs that you eat in that event are relatively low.

Allegiant's success really is due more to having a savvy business plan. They run the airline at close to break-even, but make money by selling vacation packages with the air tickets. The relatively low capital/lease costs for the planes help them to serve thinner markets with less-than-daily flights -- and for the most part, they don't directly compete with anyone.

knope2001 · Wed Dec 19, 2007 9:11 pm

When you get past a lot of the bluster both pro and con, the biggest gut-check has to come from that remarkable yield of 5.08 cents per mile. That's stunning, especially for an airline which flies excluisively point-to-piont traffic.

In the quarter (the T100's for the whole quarter are available) the average passenger trip on Skybus was 1168 miles. At 5.08 cents per mile that would mean an average fare of about $59.36 each way.

*IF* yield was level over distance (meaning yield was 5.08 cents in all markets) that would mean these average one-way fares:

$107.19 Oakland
$103.07 Bellingham
$100.94 Burbank
$99.77 San Diego
$49.38 Fort Lauderdale
$35.40 St Augustine
$33.53 Portsmouth
$32.16 Kansas City
$28.50 Chicopee
$17.58 Richmond
$15.90 Greensboro

Now yields are of course not level from route to route, and as a general rule short haul is higher yield and long haul is lower yield. It's very likely that Skybus' average yield was better than 5.08 cents per mile to Greensboro, Chicopee, St Augustine and the like. But the flip side is that west coast yields then were necessarily even lower than 5.08 cents per mile. With average fare of under $60 for the system, if i had to guess their actual west coast fares were in the range of $70-85, and short hauls were actually in the range of $35-50.

Skybus succeeded at selling a lot of seats at these remarkably low average fares, and they got a lot of publicity. The question, of course, is if they can raise fares and still keep loads high.

BrianDromey · Wed Dec 19, 2007 9:27 pm

Quoting Ikramerica (Reply 31):
the EU was still struggling with spiltting out their state owned airlines into private companies, and had created a situation where most nations only had one airline which only wanted to connect to major cities in other countries and see itself as an international powerhouse. There was room for these LCCs to come in and do what the big boys were unwilling to do. Further, those state carriers were charging unreasonable fares.

I do agree that there are significant differences in the US and EU markets. But my point was the Low-fares USP that SX has. They are getting the bums on seats, but they need to lower costs significantly. As their fleet grows and they push utilisation of their fleet higher they have a chance of getting costs under control.

Quoting ScottB (Reply 36):
Europe's airline industry still remains far more regulated than in the United States. Tight slot restrictions at many key airports have meant that LCC's have been forced to use alternate airports simply to fly at all.

It is true that a large number of airports are slot restricted, but there are only a few airports which are inaccessible to new carriers. LHR being the major one, LGW is not quite as constrained, similar story for AMS, FRA, MAD, MAN and just about any ohter airport you care to name. FR deliberately choose to use smaller regional airports because they were cheaper and less prone to congestion, not because they could not get access to the major airports, for the most part.

Quoting Knope2001 (Reply 37):
Skybus succeeded at selling a lot of seats at these remarkably low average fares, and they got a lot of publicity. The question, of course, is if they can raise fares and still keep loads high.

Good point, so if they can get the economy of scales right they have a fighting chance.

Brian.

EXAAUADL · Wed Dec 19, 2007 9:40 pm

Quoting MasseyBrown (Reply 34):
Several specifications of securities fraud.

technically he shouldnt be allow to run an airline then.......as his conviction is related to a business activity....if he shot someone, then i'd be mroe open minded.

nzrich · Wed Dec 19, 2007 10:04 pm

Quoting Cubsrule (Reply 33):

Agreed. FR also did not have to deal with the fact that WN set the bar much higher for LCCs in this country. For most Europeans, FR defined what an LCC is. WN did that for most Americans, and did so in a way largely incompatible with what SX does.

Yes but the original FR is different to the FR of now .. So who says that the publics impression of a LCC in America wont change .

If their fares are that low im sure they could sustain an increase in their fares without loss of passengers ...

gregarious119 · Wed Dec 19, 2007 10:11 pm

Quoting Flyinryan99 (Reply 32):
I'm curious because I don't know. What is Ryanair's yield? If they are trying to be like Ryanair, then yeilds should be comparable right?

I was thinking the same thing, do we have any idea what Ryan's and EasyJet's RASM and CASM are like? It'd be worth looking at in comparison before we assuming these numbers are out of line.

Quoting Knope2001 (Reply 37):
*IF* yield was level over distance (meaning yield was 5.08 cents in all markets) that would mean these average one-way fares:

[...]

Now yields are of course not level from route to route, and as a general rule short haul is higher yield and long haul is lower yield. It's very likely that Skybus' average yield was better than 5.08 cents per mile to Greensboro, Chicopee, St Augustine and the like. But the flip side is that west coast yields then were necessarily even lower than 5.08 cents per mile. With average fare of under $60 for the system, if i had to guess their actual west coast fares were in the range of $70-85, and short hauls were actually in the range of $35-50.

Very good analysis. I think this is why we've seen SX drop a number of the west coast flights and start focusing on the higher-yield east coast hops.

I wonder if how well they'd be served if they cut out the CMH-west coast flights, added a CMH-MCI or two, then moved the west coast hops to MCI. That would reduce the average stage length, but still allow passengers to bunnyhop across the country if they're trying to go coast to coast.

Tornado82 · Wed Dec 19, 2007 11:09 pm

Quoting Clickhappy (Reply 24):
What of recent rumors of a Skybus IPO, how does this news affect that?

That would be further proof that they're running out of money themselves and are looking for help IMO. I don't think there are many who'd want to invest now. They should have tried this when they first took to the skies and the momentum was high, bad news was nil.

Quoting MasseyBrown (Reply 34):

Several specifications of securities fraud.

Convicted, or still just being charged?

luv2fly · Wed Dec 19, 2007 11:16 pm

I am really surprised at how quiet the SX defenders have been since the release of this news?

Quoting Gregarious119 (Reply 41):
Very good analysis. I think this is why we've seen SX drop a number of the west coast flights and start focusing on the higher-yield east coast hops.

Those routes are still being flown until January I believe.

FlyASAGuy2005 · Wed Dec 19, 2007 11:38 pm

Quoting Flyinryan99 (Reply 32):
I'm curious because I don't know. What is Ryanair's yield? If they are trying to be like Ryanair, then yeilds should be comparable right?

Why should it? We are talking about two different cultures, two different continents, two different $ xchange rates, different fleet, not to mention Skybus is in its infancy and routes is not NEAR to Ryanair, or has the amount of devoted passengers who know what their pricing is like. I can guarantee you that if you walk up to 200 people, 150 won't know who or what Skybus is.

ScottB · Wed Dec 19, 2007 11:41 pm

Quoting Luv2fly (Reply 43):
Those routes are still being flown until January I believe.

I would speculate that the timing of the routes being cut is probably related to the combination of wanting to profit from holiday period traffic and needing to fly key routes for at least six months in order to qualify for incentives from the airport authority (i.e. that's why SAN is sticking around slightly longer).

Tornado82 · Wed Dec 19, 2007 11:56 pm

Quoting FlyASAGuy2005 (Reply 44):
I can guarantee you that if you walk up to 200 people, 150 won't know who or what Skybus is.

And that's here in Dayton only an hour and a few minutes away from CMH. Go as far away as only Pittsburgh or Indy and it would probably be 190/200 who don't know who they are.

Boeing727flyer · Thu Dec 20, 2007 12:45 am

I flew on them once and I will never ever fly on them again. They are really crap and to be honest they are less that the .99 store. Product is bad and their constant money grabbing is bad.

[Edited 2007-12-19 16:46:03]

asuflyer05 · Thu Dec 20, 2007 1:34 am

Quoting Knope2001 (Reply 37):
When you get past a lot of the bluster both pro and con, the biggest gut-check has to come from that remarkable yield of 5.08 cents per mile. That's stunning, especially for an airline which flies excluisively point-to-piont traffic.

Quoting Knope2001 (Reply 37):
Skybus succeeded at selling a lot of seats at these remarkably low average fares, and they got a lot of publicity. The question, of course, is if they can raise fares and still keep loads high.

What is also interesting is how little Additional Revenue (i.e. inflight sales, etc.) amounted to. Their business model seemed to bank on that when they started. They knew they would take a hit on the low fares but planned on making it up on inflight gear and excess baggage charges.

billreid · Thu Dec 20, 2007 1:48 am

Quoting ScottB (Reply 19):
The company's balance sheet showed $79.5 million in cash as of the end of Q3. By looking at retained earnings on the balance sheet, it also appears that they have cumulatively burned through $60 million of their $158 million in paid-in capital (i.e. what investors contributed to back the airline) since starting up.

Assumung you are correct this is quite disturbing (and I have no reason to think not). My guess is they will lose $35MM in a slow Q4. This will leave $44.5MM for Q1 and Q2. I believe that Q1 will be very soft rendering a $40MM loss before reaching Q2.
Goodbye that doesn't leave enough for anything.
They shut the doors in April or May leaving CMH in a world of HURT.

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