Archive for April, 2008

Skybus files for Chapter 11 – learn from their hardship

NoSkyBus2The filing on April 5, 2008, which the company claims was forced by rising fuel costs and a slowing economy, comes as no surprise (see our post of January 9, 2008). The Columbus Dispatch has more details in their article: “Skybus folds” (April 5, 2008, archive), and Columbus C.E.O.’s summary on pp 6-13 in the June 2008 issue is top-notch.

Interestingly, Skybus attempted a service recovery for my missed flight (December 26, 2007) 97 days later, on March 31, 2008. At first, I was mildly impressed. The message read:

Dear Skybus Customer:

We know that we caused you an inconvenience when we cancelled your Skybus flight and we apologize for that. Our most important initiative at Skybus now is to lower our cancellation rate and to improve our on-time performance.

Your business is very important to us, and we want to offer you an incentive to give us another try. We would like to offer you a $50 voucher good for travel on any Skybus flight, to any of our destinations, between April 1 and May 21, 2008.

All of the details are explained below. In order to take advantage of this special offer, you must log on to www.skybus.com and make your reservation no later than April 15.

All of us at Skybus are eager to see you again, and for you to take advantage of our nonstop flights, our new, full-size jets and our great destinations. We look forward to serving you soon.

Sincerely,
Mike Hodge
Chief Executive Officer

This “service recovery” happened a few days after the ouster of former CEO Bill Diffenderffer,  two days before VP Operations, Bud Sittig resigned (Columbus Dispatch story, here), and four days before filing for  protection under Chapter 11. So, less a service recovery and more a desperate last-minute move to ring up some cash? It would seem so.

Business Insight: As a business leader in their shoes, how would you decide what to do, as you watched the price of oil climb from $63.50 US / barrel to its current rate of over $110 US / barrel? What if you discovered that 90 to 95% of all US domestic routes were no longer viable with fuel prices at this level? What kind of discussion would you have with your board, behind closed doors? What would you say to your customers, suppliers, employees and their families? How ready would you be?

Now, back to your own business. In 2007 alone, over 800,000 consumers and over 28,000 businesses filed for bankruptcy protection. If you see your costs rising and suspect your markets are softening, do not wait passively. Call in your CFO, business consultant, corporate counsel and other business advisors, and contingency (opportunity?) plan to protect your future. Consider what you would do if the factors supporting your business success were to change significantly and / or abruptly. Set decision points now, when your head is clear, as far in advance as you can of any anticipated crisis.

Finally it is my strong opinion that all business leaders needs to revisit the various provisions of the US Bankruptcy Code, (Chapters 7, 11 and 13 most commonly), especially as updated by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). U.S. legal information publisher, Nolo Press hosts a bankruptcy info center, here. Canadian readers may start here for corresponding information.

My concern is that for too many of the business owners I have met, bankruptcy is not well understood, connotes to them an unthinkable personal failure and moral weakness, and is to be avoided at all costs. I have seen leaders become sick with stress and denial, ruin their family lives, make worse and worse decisions, and descend into depression – a sort of self-destruction – rather than ground themselves in reality and work through their options. While bankruptcy is painful to anyone of integrity, the self-destructive aspects are not necessary – not in this country.

In reality, US and Canadian bankruptcy laws exist very much to encourage entrepreneurial risk, and make survivable a business failure. Also, it is rare, but not unheard of for a company to reorganize under such protection from creditors and emerge, profitable and more focused, to the benefit of all parties. So while no honest soul goes into business with the intent to go bankrupt, and the process is in no way fun, bankruptcy laws offer a safety net – albeit with thorns.

Bottom line: Learn from Skybus and other failed businesses. Protect your future by contingency planning with your trusted advisors well ahead of any crisis. Commit to study reality, and act with decisiveness to institute a contingency if your business model shows signs of failing. And finally, if things don’t pan out despite your best efforts, don’t self-destruct. Get the facts about bankruptcy today, and see it for what it is – one of the many tools of an entrepreneurial culture.

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