msnbc.com staff and news service reports
updated 4/4/2008 10:17:08 PM ET 2008-04-05T02:17:08

Low-cost carrier Skybus Airlines said Friday that it was ceasing operations on Saturday, calling itself a victim of rising jet fuel costs and a slowing economic environment.

The Columbus-based company said in a statement Friday night that it would file for Chapter 11 bankruptcy protection on Monday.

"We deeply regret this decision, and the impact this will have on our employees and their families, our customers, our vendors and other partners, and the communities in which we have been operating," said Chief Executive Michael Hodge. "Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment. These two issues proved to be insurmountable for a new carrier."

The airline said passengers with reservations for flights on or after Saturday should contact their credit card companies to arrange to apply for a refund. The statement said all flights for Friday would be completed.

Skybus is the third U.S. airline to go bust in a week.

On Thursday Indianapolis-based carrier ATA suddenly quit flying, leaving passengers on the Hawaiian islands and elsewhere stranded as it again headed for bankruptcy court. Virtually all of ATA's more than 2,200 employees were laid off.

Aloha Airlines stopped passenger service on Monday, just a week after filing for bankruptcy.

Skybus began service just last May. The airline made 74 daily flights to 15 U.S. cities, spokesman Bob Tenenbaum said. It has approximately 450 employees, most in Columbus. Skybus had a fleet of 11 Airbus A319 single-aisle jets, though it had placed an order with Airbus for more than 60 jets.

Skybus is pulling the plug less than two weeks after CEO Bill Diffenderffer resigned to pursue a book-writing career. He was succeeded by Hodge, the company's chief financial officer for the past year.

Skybus endured some bumps since it began flying May 22, 2007. Over two days during Christmas week, the airline canceled as many as a quarter of its flights because of problems with two of its planes. Recently, it had been dropping flights and destinations because of high fuel costs.

After ATA's announcement this week, analysts said they don’t think larger carriers are in imminent danger of bankruptcy. But many industry observers have long warned that sustained high fuel prices and a slowing economy could push larger airlines to the brink.

“I do think that this bankruptcy highlights the difficult times the industry is facing with oil above $100 a barrel,” said Jim Corridore, an analyst at Standard & Poor’s in New York. “While I don’t think that any major network airlines are currently at risk of bankruptcy due to the high cash levels they have amassed over the past few years, I think that they will certainly be weakened and unable to offset higher oil with higher revenues.”

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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