Sorry for just now catching up with my reading from around the state over the holiday, but two stories caught my attention.
Back in October, the Dept. of Commerce and Gov. Easley announced an incentive package to bring no-frills discount airline Skybus to Greensboro’s PTI airport. (I wrote about the deal here.)
One of my main criticisms of the deal was that the State should not be investing our tax dollars in risky start-up airline ventures with high failure rates. The potential for Skybus to fail and North Carolina to get left holding the bag is tremendous.
Well, Skybus has had a couple of bad weeks of late.
First, the company reported a quarterly loss of $16 million on revenues of only $22 million. Some airline industry analysts were less than impressed, calling their revenue numbers "appalling." (Read more here.)
Second, the company had an old fashioned PR nightmare — canceled flights on Christmas. Mechanical problems grounded about one-forth of their scheduled flights on Dec. 25 and 26. And since they are a low cost carrier, Skybus doesn’t have agreements with other airlines to help passengers make other arrangements and doesn’t have a customer service telephone number to help passengers.
These are all known risks and growing pains of an upstart airline. But should government be gambling our tax dollars on it?
Company officials expect to lose money this year and turn a profit sometime next year. But what happens two years from now when the company still hasn’t made money despite taking incentive money from the state and decides to pull the plug. What do the taxpayers get out of it? Do we get a chance to get in line with the creditors in bankruptcy court to get our money back?
Better yet, what happens two years from now when Skybus comes back to the State, county and municipal governments and says that they will go under without more "assistance"? Where does the slippery slope end?
What other high risk speculative markets should the state get involved in. Hey, maybe I’ll start a hedge fund and promise to hire some fund managers in exchange for a few million from government. I’ve got as good as a chance as a startup airline.
Bottom line is, if the state is going to be handing out money to companies in the name of economic development (they shouldn’t be but…), there needs to be some sort of criteria placed on the viability of the project to succeed. Maybe if we had a little public input on these deals before they were announced it would help.