Skybus loses $16mil-Yields "appalling"
#1
Skybus loses $16mil-Yields "appalling"
Skybus in the red by $16 million
Numbers not a surprise, airline says, but analysts are wary
Tuesday, December 18, 2007 3:10 AM
By Marla Matzer Rose
THE COLUMBUS DISPATCH
The first look at Skybus Airlines' financial performance shows that the no-frills Columbus startup lost $16 million during the three months ended Sept. 30.
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.
Skybus' loss was based on operating revenue of $22 million, according to data released by the U.S. Department of Transportation yesterday. Skybus planes were 79 percent full on average during its first few months, a respectable number that put the airline sixteenth among the 96 reporting airlines.
Skybus officials said the data represent only a few months when Skybus was just starting to fly and was ramping up for flights added after the end of September. The results were "in line" with expectations, said Bob Tenenbaum, airline spokesman.
Still, two airline experts expressed concern that Skybus' yields -- an industry benchmark that is calculated by dividing passenger revenue by passenger miles -- have been very weak. In October, Skybus moved to address that by announcing that it would cut three of its five West Coast flights, since long-haul flights can't generate enough additional revenue to cover the added operating costs.
Skybus' passenger yield for the quarter was 5.08 cents, compared with Southwest Airlines' 12.50 and the average 13.00 among major national carriers.
"These are rock-bottom yields, especially in this age of skyrocketing fuel costs," said Joseph Schwieterman, a DePaul University professor and former pricing analyst for United Airlines.
"In fairness to them, this is their first quarter, and the traffic growth has been quite impressive," Schwieterman continued. "But their costs may not allow selling so many seats at nominal prices. The (passenger numbers) are solid for a startup, but the publicity generated by the $10 fares isn't filling up the seats."
A number of airlines this summer were reporting planes that were 85 percent to 90 percent full on average. Since its launch, Skybus has sold at least 10 seats on every flight for $10 -- a price that the airline admits doesn't turn a profit but that's designed to gain publicity and stimulate demand.
Another industry consultant, Mike Boyd of the Evergreen, Colo.-based Boyd Group, called the yield numbers "appalling." Boyd, who has long said he didn't think the Skybus model would work, said yesterday that the figures prove his prediction.
"This is just not a very good plan, but that doesn't mean they can't turn it around by scrapping the model," Boyd said. "There are examples of airlines that changed plans. Frontier Airlines is now highly successful, for example. (Skybus officials) need to see they've got a problem on their hands and fix it if they want to be around in a year."
The Dispatch Printing Company, publisher of The Dispatch, owns a minority stake in Skybus.
Numbers not a surprise, airline says, but analysts are wary
Tuesday, December 18, 2007 3:10 AM
By Marla Matzer Rose
THE COLUMBUS DISPATCH
The first look at Skybus Airlines' financial performance shows that the no-frills Columbus startup lost $16 million during the three months ended Sept. 30.
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.
Skybus' loss was based on operating revenue of $22 million, according to data released by the U.S. Department of Transportation yesterday. Skybus planes were 79 percent full on average during its first few months, a respectable number that put the airline sixteenth among the 96 reporting airlines.
Skybus officials said the data represent only a few months when Skybus was just starting to fly and was ramping up for flights added after the end of September. The results were "in line" with expectations, said Bob Tenenbaum, airline spokesman.
Still, two airline experts expressed concern that Skybus' yields -- an industry benchmark that is calculated by dividing passenger revenue by passenger miles -- have been very weak. In October, Skybus moved to address that by announcing that it would cut three of its five West Coast flights, since long-haul flights can't generate enough additional revenue to cover the added operating costs.
Skybus' passenger yield for the quarter was 5.08 cents, compared with Southwest Airlines' 12.50 and the average 13.00 among major national carriers.
"These are rock-bottom yields, especially in this age of skyrocketing fuel costs," said Joseph Schwieterman, a DePaul University professor and former pricing analyst for United Airlines.
"In fairness to them, this is their first quarter, and the traffic growth has been quite impressive," Schwieterman continued. "But their costs may not allow selling so many seats at nominal prices. The (passenger numbers) are solid for a startup, but the publicity generated by the $10 fares isn't filling up the seats."
A number of airlines this summer were reporting planes that were 85 percent to 90 percent full on average. Since its launch, Skybus has sold at least 10 seats on every flight for $10 -- a price that the airline admits doesn't turn a profit but that's designed to gain publicity and stimulate demand.
Another industry consultant, Mike Boyd of the Evergreen, Colo.-based Boyd Group, called the yield numbers "appalling." Boyd, who has long said he didn't think the Skybus model would work, said yesterday that the figures prove his prediction.
"This is just not a very good plan, but that doesn't mean they can't turn it around by scrapping the model," Boyd said. "There are examples of airlines that changed plans. Frontier Airlines is now highly successful, for example. (Skybus officials) need to see they've got a problem on their hands and fix it if they want to be around in a year."
The Dispatch Printing Company, publisher of The Dispatch, owns a minority stake in Skybus.
#2
Gets Weekends Off
Joined APC: Feb 2006
Position: B-737NG preferably in first class with a glass of champagne and caviar
Posts: 5,886
Your opinion of DAL, NWA and UAL, with how they cut pay, benefits, QOL, loss in company value should be more than just appalling… don’t you think?
#3
Line Holder
Joined APC: Apr 2007
Posts: 68
This quote by Mike Boyd is just another example of a guy, who, for a lot of years has been spewing forth uninformed comments he knows nothing about. It is always amazed me how someone with no talent can still make money and be a self proclaimed expert. I've been in this business for 20+ years and he has yet to be accurate about anything except the extremely obvious. There aren't many startup companies that make money in the first quarter of ops with 5 jets.
In the words of Bugs bunny...."what a maroon".
In the words of Bugs bunny...."what a maroon".
#4
Gets Weekends Off
Joined APC: Feb 2006
Position: B-737NG preferably in first class with a glass of champagne and caviar
Posts: 5,886
Like Rick Sanchez of CNN. He used to be a reporter in Miami. He has a pilots license and was a self proclaimed expert of commercial aviation. The old adage "There are more A$$es then horses to go around" when you talk about Rick Sanchez.
#5
Brad Bartholomew of the far more reputable The Newfoundland Group, LLC, replied to email I send a while back asking his what he thinks of the viability of Skybus and he said that he personally knows Ken Gile and thinks if anyone can run a start up low cost airline it's Ken. He's not exactly in a job (he's a senior WN CA) where he'd like to see Skybus be too successful either.
#6
btw.. VX posted a loss more than 2x the size in the same period. Makes 16M in ramp up/fixed costs look good. I would argue with only 4-5 airplanes in that period, it was a miracle they didn't loose more.
#7
skybus faces the same challenges as everyone else. i think when you see people bashing soley on pay and lowering the bar that it is hogwash. their biggest test will be this year growing their new focus city. can they do it in a reccessionary environment, 100 oil, weak demand at a new focus city that has two huge airports within an hour drive, CLT and RDU. they both have all of the other legacy, LCC and of course southwest, who put midway out of business. if GSO surivives, they'll make it, if not they'll be forced to overhaul their entire plan. cheap tickets will always sell to a degree.
#8
[quote=yoke jerker;291753]skybus faces the same challenges as everyone else. i think when you see people bashing soley on pay and lowering the bar that it is hogwash.
They are lowering the bar..... If everyone is at Market based wages then>>> Sky Bus and VA are lowering the bar!!!! Duh!
It is not really bashing when it is true!
They are lowering the bar..... If everyone is at Market based wages then>>> Sky Bus and VA are lowering the bar!!!! Duh!
It is not really bashing when it is true!
#9
Al,
i'll give you the logic that on it's face, the statement " lowering the bar" applied to an airline who comes out with wages in a modern jet below all other carriers in the US as fair in that context.
i just think that they'll never actually lower the bar. i think their model and what they're trying to do is so different, that the legacies have little risk of losing their loyal and frequent business travelers to them. Further, the growth for the legacies is all in int'l traffic with stagnant or no growth in domestic short haul. yields stink on transcon for everybody in a narrow body. gordon bethune proved back in 2001 that flying a 757/300 was the best way to make money in domestic. everyseat over 153 was pure profit.
what i do know about them, i can say their stock given current market economics could never possibly trade at the 70 price that the pilots are told it will. actually a friend that works told me 68 to 78 is what they tell in the group presentation.
these things can happen with labor: the labor pool for qualified applicants who'll take that job will shrink rapidly given the demand at all the other legacy and LCCs. pressure to recruit and train labor will actually drive wages up at SX. this is pure econ 101. second, if it becomes a type rating factory which it probably is ( they don't know it yet) they'll still have to raise wages to keep pilots. if they hemorrage losses then they'll lose labor faster than they can train it. i think some guys that work there know they'll to raise pay ultimately especially if the stock never trades above 30 and they do grow and then the pilots organize.
i'll give you the logic that on it's face, the statement " lowering the bar" applied to an airline who comes out with wages in a modern jet below all other carriers in the US as fair in that context.
i just think that they'll never actually lower the bar. i think their model and what they're trying to do is so different, that the legacies have little risk of losing their loyal and frequent business travelers to them. Further, the growth for the legacies is all in int'l traffic with stagnant or no growth in domestic short haul. yields stink on transcon for everybody in a narrow body. gordon bethune proved back in 2001 that flying a 757/300 was the best way to make money in domestic. everyseat over 153 was pure profit.
what i do know about them, i can say their stock given current market economics could never possibly trade at the 70 price that the pilots are told it will. actually a friend that works told me 68 to 78 is what they tell in the group presentation.
these things can happen with labor: the labor pool for qualified applicants who'll take that job will shrink rapidly given the demand at all the other legacy and LCCs. pressure to recruit and train labor will actually drive wages up at SX. this is pure econ 101. second, if it becomes a type rating factory which it probably is ( they don't know it yet) they'll still have to raise wages to keep pilots. if they hemorrage losses then they'll lose labor faster than they can train it. i think some guys that work there know they'll to raise pay ultimately especially if the stock never trades above 30 and they do grow and then the pilots organize.
#10
Time will tell..... Our management always tries to use start ups as a way of telling us we better watch out... Fact is a start up or LCC or SW when they enter the market usually stimulates traffic....
I really do not care to bash the individual here.... I, like everyone, want to see the working stiff make more coin!
What has CEO pay done post 911.... I think it is up around 400%!
I really do not care to bash the individual here.... I, like everyone, want to see the working stiff make more coin!
What has CEO pay done post 911.... I think it is up around 400%!