Pass along a news tip by clicking HERE.

Saturday, April 05, 2008

Ohio-Based Skybus Airlines Folds: Columbus Low Cost Carrier Flew For 10 Months

COLUMBUS (TDB) -- The news of the short-lived airline's abrupt demise -- and its stranded passengers and jobless workers -- is on its Web site here and in the Columbus Dispatch here. There are indications between the lines that Skybus was partly a product of the public dole -- state money flowed in to prop up its shaky business and marketing plans. Not corrupt, but pie-in-the-sky. Experts wondered how it could succeed with $10 fares at a time of rising fuel prices and a difficult economic environment. The State of Ohio, courtesy of former GOP Gov. Bob Taft's lame duck administration in late 2006, approved up to $16.24 million in loans and incentives for Skybus' startup. Somebody in authority ought to dig through the records to see if everything was on the up and up. The Republicans running state government at the time seemed overjoyed to hand out the public money to back an over-optimistic, some might say dubious, business plan. Another incentive agreement is available here. Here's former Lt. Gov. Bruce Johnson, who served Taft as the state's economic development director, about Skybus and the government incentives he shovelled its way:

"The positive economic impact of Skybus' entry into the Central Ohio aviation market is cause for excitement and the State of Ohio is committed to providing valuable support for its success. Access to reliable and affordable air service is a strong incentive for corporate executives searching for a place to locate their multi-million dollar corporations. By locating this facility in Ohio, Skybus will make the state even more attractive to business and will have a significant impact in Central Ohio's air industry."

He predicted the airline would created 7,800 jobs and $3 million in new payroll taxes and have an annual economic impact of at least $1 billion:

"Airlines are huge job generators that encourage additional business growth in communities where they make their investments."

But the rose-tinted predictions were all for naught. Skybus has folded, the bankruptcy lawyers will be extremely busy starting Monday, and Ohio was stung by a pie-in-the-sky business plan.

[UPDATE: 11:53 AM -- Bob Taft himself hailed the government investment in the start-up. On Sept. 22, 2006, he said the airline would benefit the whole state: "This investment will have a far-reaching positive economic impact on the central Ohio region and the state as a whole. We have worked hard to create a climate where emerging companies can grow and prosper. Skybus' commitment to Ohio validates our efforts and I am confident that the company's decision to expand its Port Columbus operations will generate business investment and job creation." Taft obviously got it wrong about the "far-reaching positve economic impact" of Skybus. ]

[UPDATE 2: 12:15 PM -- The newspaper in Greensboro, N.C. reports today the low-fare airline was feted by community and state officials as an economic development tool. Apparently, up to $57 million worth of incentives were on the line in North Carolina. People were enthusiastic about Skybus. But the business model seems to have been deeply flawed because it could not adapt to changes in the economy -- or could not anticipate a different business climate.]

5 comments:

  1. Too bad. This model helped people fly cheap, but they just didn't make it.

    I had to call my CC company for 3 refunds for two trips to FL and one to CA from Columbus. Total refund was under $400 for all three - an amazing deal that is now too good to be true. There goes my summer travel!

    ReplyDelete
  2. If this isn't a sign of a struggling economy, then what is? I can't say that I didn't see this coming, after Diffenderffer bailed out two weeks ago.

    Luckily, I purchased the AIG Travel Insurance when I booked my flight. We'll see how that goes on Monday when I try to file my claim. I'm sure the phone lines will be jammed. My Credit Card company is sending me some forms to fill out. Between the two, I should get my money back. Unfortunately, I paid full price for short term booking to L.A. No $10 seats for me.

    Best of luck to all the employees and stranded travelers.

    ReplyDelete
  3. The problem is still regulation. Low-cost airlines in Europe (Ryan Air) have similarily cheap fares, higher fuel costs and are thriving.

    ReplyDelete
  4. Too bad...everyone I know who ever flew the airline had good things to say about it.

    ReplyDelete
  5. Taft/Strickland failedApril 10, 2008 2:54 AM

    Bob Taft's 3rd Frontier and Ted Strickland's copycat program leads to results like this. The government should not be spending its money doing the Venture Capital business.

    ReplyDelete