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Skybus - $10 Fares Great for Customers, but What About Profitability? |
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Market Potential
The market potential for cheap flights is huge. But when you give it some thought, isn't the market for free flights the largest yet? Skybus will have no problem finding passengers who want to fly for rediculously low rates. The Columbus area isn't a large metropolitan area, but when you start factoring in that Cincinnati has the highest airfares in the country and is only 118 miles away (about 2 hours straight shot on I-71), Skybus will have no problems finding passengers.
Competition
The airline industry may very well be the most competitive industry, and likewise is very hostile towards new entrants. With several airlines recently emerging from bankruptcy, including Delta Air Lines with a hub in near-by Cincinnati and a significant presence in Columbus, Skybus finds itself in the midst of airline competition. Despite all of this, Skybus may find themselves skirting the competition thanks to what has been called "The Southwest Effect." In a nutshell, The Southwest Effect states that in each market Southwest Airlines enters, they create new customers, rather than steal from the current customers. What little passenger defection their is from the encumbant airlines is usually made up for by the overall increase in passengers. Granted there becomes a point where you can no longer "create" passengers as a cities population center is eventually tapped out, but Skybus is still too small to see this. Ironically, Skywest flies into several Southwest markets, including Columbus itself, and Southwest could start seeing their own "effect" being used against itself.
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