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 The founder of ultra-discounter Skybus Inc., which ceased operations last week after only 10 months in the air, isn't ready to see the airline he created die.
John Weikle, who started planning Skybus in 2003, told the airline's hometown Columbus Dispatch newspaper that he has sent a letter to the bankrupt company's board expressing his interest in taking over and reorganizing the airline. Weikle left the company shortly after it began flying last May. Additionally, Weikle told the Greensboro, N.C., News & Record that the carrier has about $10 million left in the bank, which he says is enough seed money to attract other investors. What he fails to mention is that $10 million is all that is left of $160 million the airline raised in startup capital, a burn rate that is sure to give pause to would-be investors. Given that Skybus was unable to attract additional funds prior to shutdown despite its backing by blue-chip investors such as Fidelity Investments, Morgan Stanley and Nationwide Mutual Capital, plus the difficulties other carriers that have shut down in recent weeks including Aloha Airgroup Inc. and ATA Airlines Inc. had raising funds, there is little evidence to support his argument that he could raise the needed cash to get Skybus up and running. As Skybus director Robert Milbourne told Columbus, Ohio, television station WBNS, "When John Weikle came to town, he had no money. When he left town, he had no money. If he comes back to town, I don't think he has any money." It is unclear how much capital Weikle would like to raise to revive Skybus, but he should know firsthand how tough it is to find airline investors in this environment. The entrepreneur told the Columbus Dispatch that he is returning $2 million in seed money he had raised to try to launch another airline based in Charleston, W.Va. Those plans were put on hold until the airline could reach its goal of $3 million in startup capital. Truthfully even in the best of markets, the Skybus model was a risk. While charging as little as $10 a seat is going to generate traffic, an airline has to produce a lot of fee revenue from baggage charges and selling soda to pay its bills under that model. While ultra-discounters have flourished in Europe, so far no one has been able to make the model work with U.S. customers who are used to traveling heavy and not having to pay for the privilege. Industry analysts say that Skybus could have made the ultra-low-cost model work had it made other choices, such as making it easier for customers to easily connect through its Columbus hub or not pushing all sales and customer service questions through its Web site instead of providing a 1-800 number to call. Some question whether Skybus' home Columbus market is big enough to provide necessary passenger feed for an airline and took issue with the airline's practice of flying into out-of-the-way cities including Wilmington, Del., and Chattanooga, Tenn., while marketing the destinations as Philadelphia and Atlanta, respectively. Ultimately the ultra-low-cost concept model and its rock bottom fares will be tried again in the U.S. But it isn't likely to happen until the economy improves and investors and airlines come to grips with $100 barrel oil. Until then Weikle would be better off letting his creation rest in peace. - Lou Whiteman See TheDeal.com story on Skybus' demise See Columbus Dispatch story on Weikle's plans See Greensboro News & Record story on Weikle's plans See WBNS report on Weikle's chances CategoriesComments
From: sf,
Flysalot's above comments post is as well a thought out; insightful and accurate internet post I have ever seen. I have followed Skybus as well. As a bargain flyer, I was excited about the $10 early deals they offered. They did seem to expand too early. In my opinion, they "opened" a Niagra Falls airport route that they reported and never got around to opening due to their bankruptcy. It seems that if you're staring @ the abyss of bankruptcy, you don't start announcing new routes and get people depending on you. That's erratic. Also, all the "red herrings" that were out there with Skybus. They applies for international routes but never followed through to the Bahamas or Cancun. And, the West Va./Charleston Airline that was going to follow the Skybus Model. Apparently, RyanAir has hit the spot in Europe with this cheap airfare model. Someone, here in the US, should be able to capitalize on the RyanAir model.
Posted on:
April 9, 2008 9:51 PM
From: Sad FA,
Well, my blog will not be as thought out or insightful as the 1st but I am speaking with heart. As a former Skybus Flight Attendant, it killed me to see the airline go down and I would love to see it be revived. The model could have worked had it not been for Bill "Big Toothed" Diffenderfer.
Posted on:
April 10, 2008 12:25 AM
From: Judy,
I loved Skybus. So many people who couldn't afford to travel before could afford it if they got up early and got the cheaper tickets. Even the most expensive tickets were usualy a lot cheaper than other airlines. And the non-stop flights are great. Now the only flights I can find to Florida that I can afford have a layover somewhere completely out of the direction of Florida. I miss you Skybus.
Posted on:
April 11, 2008 10:17 PM
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Yes, the burn rate of the prior management team was unbelievable. From what I have been able to piece together from the news and discussions with former employees is that Skybus failed because of mismanagement. The founder John Weikel left soon after the first plane took off because he and the CEO (Diffenderfer) picked by the board over his objections could not agree on the direction the new CEO was taking the fledgling airline.
When Weikel left advance bookings were better than planned. Soon, however, the CEO's lack of operational experience with an airline became apparent. New routes were quickly added before the original routes had time to mature. The new routes were added by the CEO without first having been researched by the Back Aviation Group. The Back Group researched the original routes and these routes were doing much better than estimated by Back.
Soon after it started, the company began an aggressive binge of expansion much sooner (as much as a year)than planned by the founder.
The new routes added by the operationally inexperienced Diffenderfer were added and then withdrawn or cut back after thousands of advanced ticket sales were sold (San Diego, San Francisco, Seattle, Chatanooga, Niagra Falls, Gary, Indiana, Hudson Valley, New York).
On Christmas Day the wheels started to fall off. Either overworked or poorly trained ground crews in two different cities ran ground equipment into two different planes taking them out of service and stranding hundreds of Skybus paasengers. In short, the flying public soon lost confidence that Skybus could get them from Point A to Point B in time or any time. The result: advance bookings fell from near 80% to less than 50%. You could get your fuel for free and lose money with the drop in passenger confidence Skybus experienced.
In spite of the huge cash burn, Diffenderfer kept expanding and failed to keep an eye on the bottom line. Reports are the founder predicted all of this before he left, yet the board still left Diffenderfer in charge of the fast sinking ship. By the time the Board took action to remove Diffenderfer, it was too late. They tried to raise new funds, but these efforts failed. Notr surprising new investors would want to throw money at the same board and operations personnel that managed to burn through $160 Million in capital before the first year was finished.
I can almost hear the potential investors: You need more money? What happened to the $160 million we gave you to start? Skybus: Well, we spent it on expansion. Where did you expand? Skybus: We went to Chatanooga, Niagra Falls, Hudson Valley and Gary, Indiana. How did you pick those cities? Skybus: Bill Diffenderfer picked em. But, hes gone now.
I hear your pilots are planning to unionize. Tell us about that. Skybus: Only 80% are in favor of a union. How did you tick them off so quickly. Skybus: We are still working on that. We sent them e-mail asking them why they are unhappy. We love to communicate work rule changes through the internet.
Well what happened on Christmas Day? Skybus: We had a couple of accidents with the equipment. And, we thought we had that fixed but it happened again twice within the last month. Did your COO leave too. No, we are relying on him to fix this mess. Investors again: Well, we gotta go and catch a bus. We will let you know. Don't call us, we will call you.
The Skybus model works with the right management. Bill Diffenderfer was not the right CEO for Skybus, and Weikel tried to tell the board before he left. When Diffenderfer was hired, Weikel was on the board. Soon after his arrival Diffenderfer complained about Weikle's oversight and access to the board. The board responded and eliminated Weikel's position on the board. Not surprisingly, Weikel left soon after Skybus took off.
Now Weikel has a plan to save Skybus and the 450 jobs that will be lost if Skybus cannot be saved. He has asked the board to work with him. Lets hope they accept his offer.