$10 air fares? Check-in to Skybus

For airlines, it always seems like a race to the bottom. And, with the low-cost structure of the internet, we are seeing some creativity with airline fares. The latest comes from Skybus Airlines.

The concept is that -- for each flight -- there will be at least 10 seats at $10 a piece. That sounds pretty good for the customer. But hasn't deep discounting been a big problem for the bottom line, or can Skybus be another JetBlue Airways (NASDAQ: JBLU) or Southwest Airlines (NYSE: LUV)?

Well, Skybus does have about $160 million in the bank (so there is some runway). There are some other tweaks: You can only purchase tickets from the company's website, and you'll probably be nickle-and-dimed on extras (like food, check-in of bags, and so on).

I had a chance to interview Rafi Mohammed, who is an expert on pricing. He runs a consulting firm, Culture of Profit, and is the author of the book The Art of Pricing. He says: "How do new airlines enter a market and give customers a value-based reason to try their service? It always starts with a discount. New airline entrant Skybus is offering discounts in a grand and intelligent style by guaranteeing that at least 10 seats per flight are offered for $10 (plus taxes). Not only have these $10 fares made a huge marketing splash, but they are designed to create loyalty to the Skybus website. Sure there's a good chance that the $10 seats will be sold out, but it definitely makes sense for a traveler to at least check availability when booking a trip to see if luck is on their side. And if that $10 fare is not available, they may stick around to book a $79 fare."

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.