GEF @ 8:08 AM MST
By Nancy Kercheval
April 5 (Bloomberg) — Skybus Airlines Inc., a U.S. low- fare carrier that started operations less than a year ago, stopped service today, the third airline to shut down this week as fuel costs soared and the economy slowed.
The closely held, Columbus, Ohio-based airline began offering service May 22 with some tickets as low as $10 for a four-hour flight. It will seek bankruptcy protection next week.
Aloha Airgroup Inc., a closely held Hawaiian airline that filed for bankruptcy protection, ended service April 1 when it couldn’t find a buyer or financing to stay in business. ATA Airlines Inc., a Midwest carrier based in Indianapolis, shut down the following day when it sought bankruptcy protection, blaming its demise on high fuel prices and the loss of a contract for military charter flights.
“Nobody has a long-term viable business plan that can be sustained at these jet-fuel prices,” said Darryl Jenkins, an airline consultant. “This is a killer category. We’re probably going to see some more casualties out there.”
About 90 percent of airline routes probably aren’t profitable, Jenkins said. “What do you do in a situation like that?”
Jet fuel has increased 62 percent in the past year, including a 3.7 percent rise to almost $3.20 per gallon this week, according to the International Air Transport Association, a trade group representing 240 airlines. The typical Airbus A319 flown by Skybus pilots carries 6,300 gallons of fuel.
“Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment,” the company said. “These two issues proved to be insurmountable for a new carrier.”
Skybus operated a fleet of 11 Airbus jetliners and served 15 cities.
The company will file for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Delaware on April 7, Skybus spokesman Bob Tenenbaum said.
“This is a shutdown,” he said. “All of (the aircraft) will end up in the bankruptcy proceeding.”
Passengers were urged to contact their credit-card companies to arrange for refunds for any flights scheduled after April 4.
Skybus attempted to follow the lead of Ryanair Holdings Plc, Europe’s biggest discount airline which often gives away tickets while charging fees for baggage and selling merchandise and ad space in cabins. Skybus flight attendants charged for drinks and food onboard and sold products such as perfume.
At the time of Skybus’s inaugural flights, Chief Executive Officer Bill Diffenderffer said he was “embarrassed” that the airline’s fares were as high as $10. Fares initially were expected to make up 85 percent of revenue.
The carrier promised to sell at least 10 seats per flight for $10, with the remainder costing at least 50 percent below the market price, Diffenderffer said in May.
In the beginning, the company said it had raised more than $100 million in financing from investors, including 20 Columbus- area backers and firms such as Morgan Stanley, and had $57 million in state and city funding and incentives.
Skybus in 2006 placed an order for 65 Airbus A319s, with a list price of $4.3 billion.
The first four planes, which were to be delivered in late 2008, were financed through Singapore-based BOC Aviation, a subsidiary of the Bank of China, which agreed in November to finance 13 additional aircraft with a list price of more than $750 million. The second order was scheduled to be delivered in 2009 and 2010.
“There’s a tremendous demand for A319s,” said Airbus SAS spokesman Clay McConnell. “We are absolutely confident all these planes will find good homes.”
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