Skybus CEO Rejecting Skeptics

Bill Diffenderffer insists his new model will stick.
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In the airline business, as elsewhere, there's always somebody a little bit younger.

JetBlue

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is no longer the new kid on the block. Since it began flying in 2000, its costs and complexities have risen. Its share price has soared and sunk.

Last year, it sold five airplanes. And last month, its founder stepped aside as CEO and sold 23% of his stock.

Contrast that with Skybus, for which everything is new. The carrier began flying in May, serving four cities from Columbus, Ohio, with at least 10 $10 fares on every flight. Its costs are minimal. A public offering is two years off. Airplanes are on order. And the CEO says he is having a ball.

"I've got the best job in the world right now," said Bill Diffenderffer, in an interview. "I was given $160 million and a blank piece of paper to design what could be the next great airline. That's not an opportunity given to too many people."

Skybus, in many ways, is JetBlue seven years ago.

JetBlue had $130 million, about $30 million less than what Skybus has. JetBlue challenged assumptions, using New York's Kennedy Airport for domestic flying, while offering both low fares and comfort. Skybus is also trying a new approach -- using secondary airports, offering bargain-basement fares and charging for every extra.

Early on, JetBlue ordered 82 Airbus A320s, while Skybus has ordered 65 A319s, which will begin to arrive in 2008. It currently flies leased aircraft.

To be sure, most people in the airline industry view Skybus as a joke. After all, there's a reason no commercial airlines fly to Chicopee, Mass., or St. Augustine, Fla., but both will get Skybus flights next month.

Columbus might look like a friendly, out-of-the-way place to base an airline, but don't be fooled. The airport is dominated by

Southwest

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, which last week fired a shot across the bow at Skybus. For one day, it offered one-way Columbus fares as low as $15. Note to Skybus: You have $160 million. Southwest has $1.9 billion. Don't make them mad.

Airline industry disdain doesn't discourage Diffenderffer, who recalls a Mark Twain quote: "Whenever you find that you are on the side of the majority, it is time to reform." Diffenderffer, 56, says his model is successful in Europe and his investors, at least, are believers.

The head of Skybus has 30 years in the travel industry. He started as an Eastern Airlines attorney and had stints as CEO at SystemOne and a travel software company. He is pleased, he says, that he can act on the concepts espoused in his book,

The Samurai Leader

, which is "all about seeing great opportunities and having the fearlessness to go after them and the wisdom to succeed."

Two weeks ago, Diffenderffer, dressed in jeans and a crumpled white shirt, bounded off the inaugural Columbus-Greensboro flight, which arrived three hours late, and began quizzing passengers about whether they were treated well. Some were not too miserable to respond positively.

Travel analyst Henry Harteveldt of Forrester Research says a zealous and entrepreneurial CEO, a willingness to challenge convention and a pile of money are all useful assets. "This country was built on people, like

JetBlue founder David Neeleman, who took a look at product offerings and said, 'I think I can do it better,'" he says.

But Harteveldt suggests that JetBlue and Skybus have a critical difference. "While JetBlue says it is restoring humanity to air travel, it seems as if Skybus is taking away humanity in favor of a cheap seat," he says. "There is a difference between being true to your niche and being blind to your customers' needs."

For instance, JetBlue A320s have a minimum of 34 inches of pitch between seats, while Skybus offers 28 to 29 inches. Skybus says removing magazine pouches adds two more inches of legroom.

Additionally, the airline eschews telephone contact with passengers. "One day, they will encounter a bad weather day, flights will get canceled, people will have questions, and they will not be able to call the airline to get somebody to help them," says Harteveldt. Soon thereafter, he predicts, a member of Congress will decry this method of doing business.

Diffenderffer says nothing trumps low fares. Fares below $100 "mean that instead of going out to dinner, you can fly to California," he says. So far, Skybus loads exceed 80%. Ancillary services such as checking bags will add about $10 to $20 per passenger to the average $50 fare.

And sure, it's nice to have a phone number. At least, it was a nice touch in a 20th-century business model. At some point, you must move on. "We're the first ones to think of an airline as an e-commerce company," Diffenderffer says. "We are going to be 100% Internet in terms of our relationship with passengers."