On the Auction block
Independence Air goes on block By Marilyn Adams, USA TODAY
In a long-shot bid to survive, 17-month-old discounter Independence Air filed for Chapter 11 bankruptcy-court protection Monday.
Flyi chief executive Kerry Skeen said the airline suffered from bad timing.
Tim Dillon, USA TODAYDulles, Va.-based Flyi, the corporate parent of Independence Air, asked a Delaware bankruptcy judge to authorize an auction of the airline, in whole or part, in a bid to raise cash.
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The airline, which operates 230 daily flights and flies mainly in the East, said the filing has no immediate effect on its schedule. But its business plan, based on rock-bottom fares and extensive use of small 50-seat jets, has drawn skepticism from the start.
Analysts such as Ray Neidl of Calyon Securities expressed doubt Monday that an investor will emerge to buy the entire money-losing carrier. He and others said Independence may be forced to liquidate.
Said Neidl: "We did not believe that (Independence's) model of using regional jets as a low-cost airline was ever feasible."
Aviation consultant Mike Boyd of Evergreen, Colo., called the bankruptcy filing "inevitable" and said, "I would suspect this thing will collapse," he said.
The filing follows deep schedule cuts announced last month by the upstart airline that until 2004 made its money by flying under contract as a feeder to United and Delta.
The carrier joins bigger airlines in operating under bankruptcy protection, including United, Delta, Northwest and discounter ATA. US Airways recently exited bankruptcy.
Independence, based at Washington Dulles airport, said Monday it expects to keep flying its schedule for 60 days during the proposed auction process. Whether the carrier's $24 million in available cash, plus revenue from ticket sales, is enough to keep it afloat for that long remains unclear. In an interview, CEO Kerry Skeen, who guided the corporate transition from a contract flier known as Atlantic Coast to an independent carrier, said the company has reached out to a "substantial number" of potential investors without success.
In a bankruptcy auction, bidders could make offers on the entire airline or just certain aircraft or gates at Dulles or elsewhere.
"More money needs to come into the company for us to continue," Skeen said in an interview. "There is value here."
Skeen blames high fuel prices for his airline's financial crisis. He declined to say how fast cash is disappearing. To keep costs down, other low-fare airlines use full-size jets to spread costs over far more seats. Independence now flies 12 full-size Airbus jets, but most of its fleet is small jets.
During the second quarter, Independence burned nearly $500,000 cash a day, according to financial statements.
If the carrier shuts down, United, Delta and US Airways are likely to benefit from the diminished competition from Independence, which, at times, has sold one-way tickets as low as $29.
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