Jet America: If at first you don’t succeed…
FRIDAY REFLECTIONS, WITH RON KUHLMANN & THE CENTRE. Popular wisdom tells us that lightning never strikes twice in the same place, but the new US startup, Jet America, a brainchild of John Weikle, looks a whole lot like his previous failed venture, Skybus. Lightning alert!
Skybus was an 'ultra low cost carrier' that commenced operations from its base in Columbus, Ohio on 22-May-2007 and ceased operations less than a year later on 05-Apr-2008. The airline was predicated on the Ryanair model and served primarily second tier airports. As one example, it accessed Seattle through Bellingham Airport, roughly 90 miles north of Seattle centre. Boston was “served” via Portsmouth, New Hampshire, an airport slightly closer to Portland, Maine than Boston.
The carrier’s signature deal was that it offered at least ten seats on every flight for a fare of USD10.00 (plus, plus, of course). Like Ryanair, and many other US carriers now, it then charged for every ancillary product and service. Also like its European template, it portrayed its airports as being convenient but uncongested, perhaps inferring that the image of Seattle’s Space Needle could be sighted from Bellingham on a clear day. In fact, the airport is far closer to Vancouver, BC than to Seattle.
The airline began bravely, ordering over 60 new A319s for its fleet and expanding its service across the nation. Interestingly, however, the airline actively discouraged passengers from connecting. Anyone wishing to fly from Seattle (Bellingham) to Boston (Portsmouth) had to claim bags in Columbus and recheck them for the second flight – with new charges for the service. There was also no effort made to time flights so that such connections might be made.
All of this is even more interesting because Columbus has had, for some time, Southwest. If headed west, Southwest could offer a number of connections throughout the day to the real Seattle, SeaTac, the airport from which you can actually see the city. Plus your baggage would be carried free and you could gorge on free sodas and peanuts for hours.
Additionally, if the carrier had been based in Chicago or New York, cities with massive O & D traffic, its plan might have been more successful. However, Columbus, a metro area of 1.75 million, is simply not a destination to which throngs throng.
Perhaps seeing that the business plan needed a bit of tweaking, the carrier then began to fly from Portsmouth, New Hampshire to points in Florida and established a second focus city in Greensboro, NC. However, it all came too little and too late. In Feb-2008, most service to the West Coast was terminated and by early April it was completely shut down.
It is interesting to observe that while Skybus so scrupulously followed much of the Ryanair model, it failed to observe that Ryanair, while also discouraging connections, actually bases aircraft in a great many cities and operates hundreds of point-to-point flights that go lots of different places.
It tried, sort of
By fall 2007, the carrier was looking at establishing additional bases with its first being Greensboro, North Carolina. Its airport, Piedmont Triad International, serves a population base of about one million and has been primarily a spoke in the hub systems of numerous US carriers.
The airport had been served by the LCC AirTran, but it dropped the destination due to poor financial results. It had also served as a base for Continental’s ill-fated CalLite experiment in the mid 1990s.
The region was desperately eager to bring additional air service and actively courted Skybus by offering a stimulus package that included marketing funds, plans for a Greensboro logo aircraft (USD500,000 but never achieved) and the primary incentive, a USD2.15 subsidy per passenger by the airport authority.
In return, the region was to become a crew and maintenance base for the airline as it ramped up service and expanded.
Skybus' big start
Service began Tuesday, 15-Jan-2008 and by the end of that week included 6 destinations. By the end of the month, service was begun to the New York (Stewart) and Los Angeles (Burbank) regions. The Los Angeles service had an especially short lifespan.
While the airport did see rapid passenger growth: 24,091 in February 2008 and a record 42,769 in March, we must remember that those passengers boarded in March cost the airport almost USD92,000 in subsidy payments.
While the region placed a considerable amount of money on the table in order to lure the airline, its short tenure, lasting a mere 90 days, expended only a portion of the funds.
At present, in mid-2009, Greensboro is again a spoke with links to numerous hubs and served almost exclusively by regional jets.
And the carnage?
Too bad for Columbus as well, although the traffic drop 2007-08 was only about 11%. Remember, Skybus operated during only a portion of both calendar years. More interesting is the quote below, also from the airport’s press office, that cites the figures for April 2009, when Skybus was essentially gone. April showed a 9.5% drop, pretty much without any effect from the carrier’s demise; so the declines are due to the economic upheaval that is affecting all airlines and airports.
Port Columbus Airport passengers
Airport Press Release: “For the month of April(2009), Port Columbus had a 9.5% drop in passengers compared to the previous year. A total of 525,223 passengers traveled through Port Columbus in April as compared to 580,193 in April 2008. Year-to-date 1,918,261 passengers have used Port Columbus, down 21.1% from 2008.”
Aside from Columbus and Greensboro, the effects of the shutdown were not greatly felt anywhere else as the carrier had minimal service to most of its network. The airline never operated more than 12 aircraft and was therefore a marginal presence at most destination airports.
Even as the supernova of Skybus was arcing through its short life, John Weikle, its founder, was busy starting up a carbon copy of the airline, this time based in Charleston, West Virginia. Just as a point of reference, Charleston is 135 miles (217km) from Columbus and 186 miles (299km) from Greensboro, putting them reasonably at the outer edge of Charleston’s catchment area.
On April 3, 2008, the West Virginia Gazette ran an article entitled, “Jet America details still under wraps” which released some information on the status of the new project and revealed that fundraising had been going on for some months. As seed money both the Charleston and Central West Virginia visitor’s bureaus had contributed USD500,000 each.
In the Gazette article Matt Ballard, president of the Charleston Area Alliance – another investor group – noted that the airline was to be modeled after Dublin-based Ryanair.
Ballard “confirmed the involvement of John Weikle, a South Charleston native and founder of Skybus Airlines.” Mr. Ballard, quoted in the article, said, "It's one [model] he [Weikle] believes in and it works from a profit and a customer standpoint." An interesting statement given that on that date, April 3, Skybus was two days away from failure and there was ample evidence of massive losses by the carrier, which by this time had already abandoned all service to the west coast. Plus, similar promises had been made at Greensboro, less than 200 miles away and the project sponsors there were beginning to sour.
The article concluded by noting that “destinations and other specifics [of Jet America] will be released in the coming weeks.”
One week later, on April 8, 2008, the Charleston Daily Mail published an article entitled “Skybus founder says refunds of public money for Jet America startup in the works.” Some millions had been held in escrow and the previously cited Mr. Ballard was filing to have it returned. He was quoted as saying, "The Skybus announcement has taken the wind out of our project. I can't tell you how disappointed, as the economic development organization for this region, that the Charleston Area Alliance is to see this project suspended."
Ballard noted that since a number of airlines had shut down in a single week (ATA and Aloha among them) it was time for “leadership on the Federal level for a national energy policy.” So it was just about fuel cost? Apparently, because he then said that, “…most if not all of the investors here in the local area still believe in John Weikle's Ultra-Low-Cost Carrier model” with “many private investors who despite the Skybus announcement have told me that they want to move forward.”
While not explaining the “why”, there is a clear window on the “how” part of continuing investment in airline startups. A quick review here. On April 5, three days prior to this odd enthusiasm, an airline with exactly the same business model, proposed by the same individual, had folded. It never made money and dropped many of its routes even before its final demise.
Nonetheless, there were folks who wanted to move ahead despite the fact that the entire population of West Virginia was less than that of the Columbus metro area. The state ranks 48th out of 50 in median income and the Appalachian region, which wholly encompasses the state, is especially noteworthy for high unemployment and poverty. Nigerian spammers take note, opportunities still exist.
Take 3:Jet America
Here we are in mid 2009, 15 months later and on the eve of the real launch of Jet America, now domiciled in Toledo, Ohio and ready to begin service from that city on July 13th, with, guess what? – at least 9 seats on each flight priced at USD9.00.
When the carrier declared bankruptcy, its CEO, Mike Hodge, offered the following explanation, "Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment. These two issues proved to be insurmountable for a new carrier."
Good thing that times have changed!? Also look for our old friends Greensboro and Charleston to reappear.
Do I hear thunder? More next week.