Tax Money Wagered on Risky Skybus Plan

How European are American travelers willing to act? For taxpayers, that’s the $57 million question — literally — as North Carolina and local governments in the Triad are lavishing incentives on a startup airline with a business model that’s new to this side of the Atlantic.

The airline is Skybus, and it began service based out of Columbus, Ohio, in May. Despite having just five jets, Skybus announced plans to make Greensboro’s Piedmont Triad International Airport its second “focus city.” What that means is that Skybus will have 11 flights a day to a total of eight destinations from PTI by late February, up from its current one daily departure. Additional flights are likely as the airline adds more aircraft. The airline will also establish a crew base in the Triad.

The airline’s growth in Greensboro was influenced by a very generous incentive package. PTI is spending $6.3 million on immediate terminal improvements and adding additional parking spaces. The airport will also pay the airline $2.15 per passenger boarded to new destinations served. Skybus also gets $300,000 for marketing. The state and regional groups, meanwhile, are offering $5 million in incentives provided Skybus creates 375 jobs.

The airport already has committed to building a $7 million terminal and a $33 million, 3,300-space parking deck should the airline board enough passengers in Greensboro. Additional marketing and incentive money would also kick in as well.

Startup businesses are always risky, and the airline industry hasn’t historically been very kind to newcomers. Yet even by those standards, Skybus is a particular stretch.

Skybus’ business model is based upon Europe’s most successful low- cost airline, Ryanair, and is unlike anything that has been tried in the United States.

Simply put, Skybus offers rock-bottom fares between, if at all possible, obscure airports on the outer fringes of major metropolitan areas.

For example, Skybus’ idea of “Boston” isn’t Logan Airport in Boston proper. It isn’t even such cities as Providence, R.I., or Manchester, N.H., the traditional alternatives to Logan. No, Skybus claims to serve Boston through Portsmouth, N.H., a city on the border with Maine. Likewise, Skybus’ definition of Fort Myers, Fla., is an airfield in Punta Gorda.

To be sure, cut-rate carriers have long existed in America. They have, however, focused on bringing tourists to and from the most popular holiday destinations such as Orlando and Las Vegas. Skybus targets a much wider range of destinations.

Skybus compensates for the rather limited demand in city pairs like Greensboro-Portsmouth by offering very low fares. It promises ten $10 fares (taxes not included) on each flight. To make up for the limited income stream from fares, the company also sells things. Like priority boarding. It also charges for each bag you check in. Skybus also charges for food and drinks — and you are not allowed to bring food onto the plane.

Skybus’ flight attendants, meanwhile, earn commissions by hawking a wide variety of products at travelers. There are also copious amounts of advertisements in the passenger cabin.

For business travelers, time is a very valuable commodity — and Skybus just isn’t the answer. In fact, it doesn’t even pretend to be the answer.

PTI also will not serve as a hub — that is as a connecting point — for Skybus, as the airline’s business model focuses solely on point-to-point travel. In fact, it doesn’t do connections at all. Sorry, would-be Punta Gorda-to-Portsmouth flyers.

With oil at or near an all-time high, and a growing fleet of new planes to pay for, it remains to be seen whether Skybus can prosper – - or even survive. Ryanair, Skybus’ European inspiration, certainly has found a profitable niche. But Europe and the United States are very different places. European cities are closer together, and public transportation systems are far better developed. Getting into urban areas from outlying airports is much less of a hassle in the Old World.

By essentially gambling that American travelers are willing to act European, Triad area governments and the state are assuming the role of the entrepreneur, giving taxpayer money to a favored competitor. That’s not fundamentally fair to other airlines. And in the case of Skybus, it just might be a bad investment.

Michael Lowrey is a policy analyst for the John Locke Foundation.

(c) 2007 Greensboro News Record. Provided by ProQuest Information and Learning. All rights Reserved.