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Low-Cost Air Carrier Shuts Down

Posted on: Tuesday, 3 January 2006, 21:00 CST

By Patricia Sabatini, Pittsburgh Post-Gazette

Jan. 3--FLYi Inc., the parent company of low-fare carrier Independence Air, announced yesterday it had run out of both cash and time and would cease all flights as of Thursday evening, just 18 months after taking to the skies.

Independence Air operates three round-trip flights daily between Pittsburgh International Airport and its hub at Washington Dulles International Airport.

The parent company, based in Dulles, Va., filed for Chapter 11 bankruptcy protection Nov. 7 and had been seeking a major investor or buyer to help the airline survive.

"There has not been a firm offer put forward that meets the financial criteria necessary to continue operations," Kerry Skeen, FLYi chairman, chief executive officer and one of the founders of the airline, said in a statement. "Therefore, we are voluntarily discontinuing scheduled service."

The airline said its last flight would leave White Plains, N.Y., for Washington Dulles at 7:26 p.m. Thursday. The last flight from Pittsburgh is scheduled to depart at 5:30 p.m. Thursday.

The airline said it would seek bankruptcy court approval to give refunds to customers with reservations after Thursday. It also will attempt to contact customers with round-trip reservations who are scheduled to return after the shutdown to offer them an earlier flight home. There will be no refunds for free tickets or vouchers.

The most likely scenario now is that Independence Air will be sold off in pieces to the highest bidders in bankruptcy court. The company yesterday reiterated that shareholders should not expect any money for their shares.

Independence Air, which launched service in June 2004 and currently operates about 200 flights a day to 37 destinations, began flying out of Pittsburgh in August 2004. At its peak, it offered 600 daily flights, including 10 flights from Pittsburgh.

The airline "provided a valuable service in Western Pennsylvania," Kent George, executive director of the Allegheny County Airport Authority, said yesterday.

Mr. George said he held out hope that last-minute funding would emerge or another carrier would buy the airline's assets and resume service in Pittsburgh.

Independence Air leases one gate at the airport. Mr. George said the airport authority already had set aside money to make up for the lost revenue until it can lease the gate to another airline.

"We reserved for the possibility that they would go bankrupt," Mr. George said. "It will not hurt us or the other airlines."

Independence Air began serving Pittsburgh with eight flights a day. Other discount airlines serving Pittsburgh include Southwest Airlines, AirTran Airways, USA 3000 and America West, which merged with US Airways, the airport's dominant carrier, in September.

Independence Air had been known as Atlantic Coast Airlines, a regional carrier for United Express, which management decided to remake into a discount carrier. Some analysts were skeptical from the beginning about its survival because Independence Air planned to operate as a budget carrier while maintaining a relatively high-cost hub-and-spoke flight system using 50-seat regional jets that are less efficient than larger planes.

The airline's demise was hastened by record-high fuel prices and rapid expansion, analysts said yesterday. It expects to lay off more than 2,500 of its 2,800 employees.

Independence Air said it expected its toll-free telephone lines to be swamped, so it advised customers with questions to visit its Web site, www.flyi.com. The company will waive all change fees but warned that customers who change their reservations online instead of by phone may not be able to book at the same price. "Unfortunately, it is a functionality we cannot disable," the airline said in a statement.

U.S. law requires other carriers to offer stand-by flights to passengers with un-refunded tickets from airlines that have ceased operations. Passengers may be charged up to $50 one-way for the service.

U.S. Airways announced yesterday that in addition to Dulles flights, it would also offer the $50 standby tickets from its hub at Ronald Reagan Washington National Airport to passengers flying to Independence Air destinations.

"Today is a sad day for Independence Air," Independence Air said in a letter to customers on its Web site. "The financial pressures in the industry have prevailed. We have run out of time."

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Copyright (c) 2006, Pittsburgh Post-Gazette

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FLYI, LCC, AAI, LUV,

Source: Pittsburgh Post-Gazette

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