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Associated Press
Atlantic Coast Severs Ties With United
Monday July 28, 8:43 pm ET
By Matthew Barakat, AP Business Writer
Atlantic Coast Airlines Severs Ties With United, Will Fly As Independent, Low-Cost Carrier
CHANTILLY, Va. (AP) -- The second-largest carrier at Dulles International Airport is severing its ties to United Airlines and announced Monday that it will fly as an independent, low-cost carrier.
Atlantic Coast Airlines says its fares will be 30 to 40 percent lower on average than travelers paid for the same flights when operated under the United Express banner.
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Atlantic Coast's partnership with United began to fray when United filed for Chapter 11 bankruptcy protection last year. United sought to renegotiate a cheaper contract with Atlantic Coast, but the two airlines could not come to terms.
But Atlantic Coast President Kerry Skeen said his airline had been considering such a move even before United filed for bankruptcy.
"This is not just a knee-jerk, desperation thing on our part," Skeen said. "We hoped we would get a deal with United ... but we felt we had an attractive alternative" if a deal could not be reached.
Skeen said the company will honor its contract with United until it is officially canceled by the bankruptcy court or until United emerges from bankruptcy. It is not clear exactly when the airline will implement its new plan, but Skeen said the airline has set April as a rough target. He said it is in the interest of both United and Atlantic Coast to have a smooth transition.
Wall Street reacted negatively; shares of parent company Atlantic Coast Airlines Holdings Inc. plunged $2.53, or nearly 24 percent, to close at $8.09 on the Nasdaq Stock Market.
Airline analyst Alexander Brand with BB&T Capital Markets, said Atlantic Coast's decision raises significant risks for investors in the near term.
"There's no way to know when it will produce a profit ... and the market just doesn't like uncertainty," Brand said.
Still, he said there is an opportunity for a carrier like Atlantic Coast to exploit an underserved market in small and mid-size cities that historically have had to pay higher fares.
Atlantic Coast will begin operations with 87 50-seat regional jets, and plans to add 15-25 mainline jets to expand its offerings, Skeen said.
Skeen said the airline sees a particularly strong opportunity in the Washington-Baltimore market, the fifth-largest in the nation. However, the company will be going up against low-fare leader Southwest Airlines, which is the largest carrier at Baltimore-Washington International Airport.
Atlantic Coast carries about 20 percent of the 15 million annual passengers at Dulles, according to the most recent statistics from the Metropolitan Washington Airports Authority, which operates Dulles and Reagan National Airports. Only United carries more passengers. Atlantic Coast would have the most departures of any airline at any of the three Washington-area airports.
James Bennett, president of the airports authority, said he expects United to remain as a hub at Dulles; some have speculated that United would drop Dulles as a hub as part of its bankruptcy reorganization.
In a statement Monday, United said it was "surprised" by the airline's announcement and believed "talks were moving in a positive direction." United officials said they had a contingency plan for the flights Atlantic Coast handles, but did not elaborate.
Atlantic Coast will continue its operations as a Delta Connection carrier
Atlantic Coast Severs Ties With United
Monday July 28, 8:43 pm ET
By Matthew Barakat, AP Business Writer
Atlantic Coast Airlines Severs Ties With United, Will Fly As Independent, Low-Cost Carrier
CHANTILLY, Va. (AP) -- The second-largest carrier at Dulles International Airport is severing its ties to United Airlines and announced Monday that it will fly as an independent, low-cost carrier.
Atlantic Coast Airlines says its fares will be 30 to 40 percent lower on average than travelers paid for the same flights when operated under the United Express banner.
ADVERTISEMENT
Atlantic Coast's partnership with United began to fray when United filed for Chapter 11 bankruptcy protection last year. United sought to renegotiate a cheaper contract with Atlantic Coast, but the two airlines could not come to terms.
But Atlantic Coast President Kerry Skeen said his airline had been considering such a move even before United filed for bankruptcy.
"This is not just a knee-jerk, desperation thing on our part," Skeen said. "We hoped we would get a deal with United ... but we felt we had an attractive alternative" if a deal could not be reached.
Skeen said the company will honor its contract with United until it is officially canceled by the bankruptcy court or until United emerges from bankruptcy. It is not clear exactly when the airline will implement its new plan, but Skeen said the airline has set April as a rough target. He said it is in the interest of both United and Atlantic Coast to have a smooth transition.
Wall Street reacted negatively; shares of parent company Atlantic Coast Airlines Holdings Inc. plunged $2.53, or nearly 24 percent, to close at $8.09 on the Nasdaq Stock Market.
Airline analyst Alexander Brand with BB&T Capital Markets, said Atlantic Coast's decision raises significant risks for investors in the near term.
"There's no way to know when it will produce a profit ... and the market just doesn't like uncertainty," Brand said.
Still, he said there is an opportunity for a carrier like Atlantic Coast to exploit an underserved market in small and mid-size cities that historically have had to pay higher fares.
Atlantic Coast will begin operations with 87 50-seat regional jets, and plans to add 15-25 mainline jets to expand its offerings, Skeen said.
Skeen said the airline sees a particularly strong opportunity in the Washington-Baltimore market, the fifth-largest in the nation. However, the company will be going up against low-fare leader Southwest Airlines, which is the largest carrier at Baltimore-Washington International Airport.
Atlantic Coast carries about 20 percent of the 15 million annual passengers at Dulles, according to the most recent statistics from the Metropolitan Washington Airports Authority, which operates Dulles and Reagan National Airports. Only United carries more passengers. Atlantic Coast would have the most departures of any airline at any of the three Washington-area airports.
James Bennett, president of the airports authority, said he expects United to remain as a hub at Dulles; some have speculated that United would drop Dulles as a hub as part of its bankruptcy reorganization.
In a statement Monday, United said it was "surprised" by the airline's announcement and believed "talks were moving in a positive direction." United officials said they had a contingency plan for the flights Atlantic Coast handles, but did not elaborate.
Atlantic Coast will continue its operations as a Delta Connection carrier
