The carnage amongst low-cost airlines continued over the weekend as Skybus Airlines Inc.
joined the dead pool on Saturday, filing for Chapter 11 protection. The third discount flier to shut down in only a week's time, Skybus pinned the blame on "the combination of rising jet fuel costs and a slowing economic environment."
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Sky-high fuel costs also brought Aloha Airgroup Inc. and ATA
Airlines Inc. crashing to earth last week and prompted many of the
larger carriers to take steps to raise fees and reduce some
routes. Aloha
halted operations last Monday, and ATA Airlines
shut down
Thursday. The shutdowns will likely put pressure on the stocks of other
low-cost carriers such as Jetblue Airways Corp. and Southwest Airlines Co., as Wall Street
gets more concerned about the ability of the smaller airlines to
weather high oil prices and the economic downturn.
- George White See Deal.com story on SkybusSee Deal.com story on AlohaSee Deal.com story on ATA
Comments
Although I agree with the fact that high fuel price and tough economy doesn't help the airline industry but, these were not the key reasons as to why these airlines failed.
1.Aloha had tough competition from the west coast to Hawaii by Hawaiian Airlines and other major carriers that fly those routes from SFO, LAX & SD. Now with Mesa's inter island airline GO along with Aloha's lack of strategic presence and growth, allowed for its demise.
2.Champion Air was flying old and expensive equipment. They flew Boeing 727 that were at the end of their 2nd or in the middle of the 3rd cycle. The high operating costs of fuel and the fact that Northwest Airlines pulled their vacation travel service contract, which accounted for roughly 70% of their business hurt them.
3.ATA was always a financially unstable company. They relied heavily on a military lift contract that was outsourced to them through Fedex. Recently, Fedex did not place ATA as a outsourcing partner for 2008 leaving them as sitting ducks.
4.SkyBus was a bad idea from the begining. This strategty doesn't work in the United States for several reasons. SkyBus is a copy of Ryan Air a super discounter in Europe based out of Ireland. Originally, Ryan Air was a copy of Southwest Airlines which is based in the U.S. Ryan Air's success relies on the fact that the customers expectations are only a seat and on time departure and arrival. In Europe these airlines compete with the likes of trains, and ground transportation that are more expensive than flying.
In the U.S. the market is spoiled, they expect more for less. When SkyBus chose its niche to be the ultimate discounter what they ddn't realize was Southwest was just that and they have been doing it for over 30 years.