Skybus Aims High on Low-Cost Airfare

And the airline industry is awash in unusual ideas that have lured financial backing. ExpressJet(XJT Quote) flies 50-seat regional jets on flights of several hours, while Allegiant(ALGT Quote) flies expensive-to-operate MD80 aircraft to small cities such as Belleville, Ill., and Kinston, N.C.

Skybus says its actual model is the Irish carrier Ryanair, which has led the industry in combining discount fares with extra charges for the slightest services and with prominent efforts to sell hotel packages and rental car agreements. Charlie Clifton, a member of the board of managers, spent 16 years at Ryanair.

"The business models have a lot of similarities," says Skybus CFO Mike Hodge, who previously oversaw Tiger Management's Ryanair investment. "The first is the ultra-low-cost model, [which] allows us to charge prices that stimulate demand and get people to take trips they wouldn't otherwise take."

Hodge says Skybus' cost per available seat mile falls below the 6-to-7-cent range of the lowest-cost U.S. carriers, such as AirTran(AAI Quote) and Southwest(LUV Quote).

The savings start with the airplanes. Skybus is leasing Airbus A319s until late in 2008, when its 65-aircraft order starts to arrive. New planes require limited maintenance, and eschewing hub connections saves time. Skybus' 15-hour utilization compares with about 11 hours a day at American(AMR Quote). Its quick turns are aided by boarding and disembarking passengers on the ramp, through two doors, cutting seven minutes off the usual, single jetway process.

Seating is not luxurious. Skybus A319s generally have 144 seats, increasing to 156 seats when its own planes arrive. Frontier(FRNT Quote) puts 132 seats in its A319s. Frontier offers a 33-inch pitch, while Skybus offers 28 to 29 inches, although Hodge says taking out magazine pouches adds two inches of legroom.