Wednesday, March 15, 2006

Skybus Financing Rumors

This article says that Skybus' raise is done, and in this one management denies it. Given what we have heard in the market, our take is that the lead investor has been identified and that the financing is being rounded out by supporting investors, but nothing has been finalized. All of this chatter is very much in line with what we have been hearing over the last 90 days or so.

Bottom line: this is very good news for Skybus, but we all know that the financing is not complete until the cash has been wired into their account. Then, and only then, will the champagne corks pop at Skybus HQ.

We wish they weren't cornered into starting out in Columbus...


At 6:54 AM, Anonymous Sunking737 said...

Wouldn't it be better to take $100 million and invest in oh say Sun Country, Allegiant, Hooters Air, or any one of the small airlines, then to start another airline.

I guess I'm missing something. Same with Virgin America.

At 10:19 AM, Blogger Emerging Airlines said...

Our view is that the American market is ripe for new entrants. As a matter of fact, we feel that there is ample room for new entrants on a cost based argument. See our new entrant primer or the Skybus feature for a slightly more detailed explanation with caveats.

We don't think Hooters or Sun Country have the structure to take advantage of the opportunity in the US market. They would need to be completely transformed. Our take is that it is better to put that $100mm in a new company with the right team & strategy.

At 2:12 PM, Anonymous Sunking737 said...

Than why is Sun Country looking for $$$.
It is a very good airline with a very good team in place.

They are watching how they spend their money.

At 4:27 PM, Anonymous Tucano Bandeirante said...

What?? Are we talking about the same U.S. airline industry that is struggling because of many things, including overcapacity?

You really believe that there is an opportunity for new entrants when practically every airline is still awash in red ink because they can't get passengers to pay high enough ticket prices? And where airlines are fighting for every scrap of market share?

For example, Virgin America talks a good game, but I really fail to see where their niche will be in the current market. And the Virgin name alone isn't going to cut it.

Plus with United, US Airways, Delta and Northwest in and out of Ch. 11, legacies are becoming leaner and meaner, and will be less apt to let new entrants like JetBlue and AirTran move in on their turf.

But I admire your optimism, no matter how misguided.

At 5:46 PM, Blogger Emerging Airlines said...

We've only been around for a few weeks. Keep reading and maybe if we are very eloquent (which we rarely are) we'll change your mind about a few things!

Here's a great place to start: Overcapacity in the US market is a myth.

At 5:52 PM, Blogger Emerging Airlines said...

Yes, Sun Country is looking for dollars, but all indications are that they are not looking at attempting to implemet a easyJet/Ryanair/Gol/Air Asia model in the US. That's where we believe there is a significant opportunity and where $100mm would be needed. Sun Country will get a lot less if their pending transaction goes forward. Allegiant picked up less cash in their raise last year too. Does that mean that they can't succeed on their MSP-focused strategy for their new money. Not at all. Then again...we'd rather go head to head with anybody before NW, especially while they are in bktcy.

At 6:10 PM, Blogger Emerging Airlines said...

Let's not lump in Virgin America into the type of startup we feel can succeed on a stand-alone basis. Their plan is very unique (which is not necessarily a good thing). They have have sold their investors on a concept that they can go upmarket and still beat the majors on the cost side. On the revenue side, look for them to have a superior two class onboard product and leverage Virgin Atlantic for all they are worth. Does this plan resemble the type of plan we beleive in? As you read our other becomes pretty clear, no. But we havent completly formed an opnion yet in the matter.

We have implicitly asked our readers to have an open mind when it comes to the Emerging Airline and startup universe. There are many bad plans and airlines out there from a financial & strategical perspective (we've written about them), but there are some big opportunities under the right set of circumstances. We'll take them one by one and present a case either way.

At 4:26 PM, Anonymous Tucano Bandeirante said...

Sorry. I've followed the startup airline universe for 10 years, and I've seen them come and seen them go, so excuse my skepticism on your optimism with the prospects for U.S.-based startups.

At 4:54 PM, Anonymous Tucano Bandeirante said...

Here's an interesting article featuring WestJet Clive Beddoe on things that will deter new airline startups:

I know we've argued this point, but Clive's a pretty smart guy who has survived the behemoth that is Air Canada, and his remarks are worth reading.


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