Soaring Fuel Cost Causes Budget Airline Groundings in U.S.
By Nancy Kercheval, Shanghai Daily | Apr. 07, 2008
Skybus Airlines Inc, a US low-fare carrier that started operations less than a year ago, has stopped service, the third airline to shut down last week as fuel costs soared and the economy slowed.
The Ohio-based airline began offering services on May 22 with some tickets as low as US$10 for a four-hour flight.
It will seek bankruptcy protection this week, Bloomberg News reported.
Aloha Airgroup Inc, a closely held Hawaiian airline that filed for bankruptcy protection, ended services on 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 US$3.20 per gallon last week, according to the International Air Transport Association (IATA), 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 bankruptcy in US Bankruptcy Court in Delaware on April 7, Skybus spokesman Bob Tenenbaum 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.