Dav8tor
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Independence Air may be near Chapter 11 filing
By Marilyn Adams, USA TODAY
Fourteen months after launching, discount carrier Independence Air (FLYI) warned Tuesday it's preparing for a possible Chapter 11 bankruptcy filing.
In a securities filing, the Washington, D.C.-based carrier didn't rule out the possibility it might liquidate.
Battered by fare wars and record high fuel prices, Independence Air also reported a $98 million loss for the second quarter, more than triple its $27 million loss a year ago. Its cash balance plummeted 61% in the first half of this year to a dangerously slim $65 million.
Company officials said the carrier hopes to borrow cash, but they weren't optimistic.
"We can't provide assurances that our efforts will be successful," CEO Kerry Skeen bluntly told analysts. "We realize there are tough times ahead."
Skeen said Independence is cutting its schedule 15% in September, to 342 daily flights, mainly by reducing the number of flights per day to existing destinations.
Independence Air is the latest U.S. airline to warn it might face a bankruptcy filing this fall, but its warning is the most dire. Although Delta and Northwest also have warned of possible filings, neither faces the prospect of liquidation.
Based at Washington's Dulles airport, Independence Air launched in June 2004 as the first low-fare airline flying 50-seat jets rather than full-size jets. It started service with more flights than any airline start-up, and with a $350 million war chest. Skeen predicted then it would turn a profit this year.
But immediately after the launch, a fare war erupted. Last fall, fuel prices began spiraling upward.
Independence competes with United Airlines, the USA's No. 2 airline, which operates a hub at Dulles, as well as No. 3 Delta Air Lines and US Airways at Reagan Washington National Airport. The pressure from United has been intense, with United — itself in bankruptcy reorganization — matching Independence almost fare for fare. All three airlines would benefit if Independence disappeared, but United would benefit most.
Bad blood already existed between Independence and United. Before changing its name, Independence flew as Atlantic Coast Airlines, a regional carrier for United at Dulles for 14 years.
When United went into Chapter 11 protection in 2002, it sought cheaper terms from Atlantic Coast, which refused, and the carriers parted.
Independence began serving midsize and large cities in the Northeast, Southeast and Midwest, including New York, Boston, Chicago and Atlanta. Today, Independence also flies 12 Airbus A-319s to larger destinations, but the bulk of its fleet is still small regional jets going to midsize cities such as Savannah, Ga.
It has struggled to fill planes as competitors cut fares and offered frequent-flier miles to keep passengers loyal. Its planes were 73% full in the second quarter, while major airlines filled 80% to 90% of their much larger planes.
Shares of Flyi, the Independence Air parent, fell 29% Tuesday, closing at 48 cents.
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By Marilyn Adams, USA TODAY
Fourteen months after launching, discount carrier Independence Air (FLYI) warned Tuesday it's preparing for a possible Chapter 11 bankruptcy filing.
In a securities filing, the Washington, D.C.-based carrier didn't rule out the possibility it might liquidate.
Battered by fare wars and record high fuel prices, Independence Air also reported a $98 million loss for the second quarter, more than triple its $27 million loss a year ago. Its cash balance plummeted 61% in the first half of this year to a dangerously slim $65 million.
Company officials said the carrier hopes to borrow cash, but they weren't optimistic.
"We can't provide assurances that our efforts will be successful," CEO Kerry Skeen bluntly told analysts. "We realize there are tough times ahead."
Skeen said Independence is cutting its schedule 15% in September, to 342 daily flights, mainly by reducing the number of flights per day to existing destinations.
Independence Air is the latest U.S. airline to warn it might face a bankruptcy filing this fall, but its warning is the most dire. Although Delta and Northwest also have warned of possible filings, neither faces the prospect of liquidation.
Based at Washington's Dulles airport, Independence Air launched in June 2004 as the first low-fare airline flying 50-seat jets rather than full-size jets. It started service with more flights than any airline start-up, and with a $350 million war chest. Skeen predicted then it would turn a profit this year.
But immediately after the launch, a fare war erupted. Last fall, fuel prices began spiraling upward.
Independence competes with United Airlines, the USA's No. 2 airline, which operates a hub at Dulles, as well as No. 3 Delta Air Lines and US Airways at Reagan Washington National Airport. The pressure from United has been intense, with United — itself in bankruptcy reorganization — matching Independence almost fare for fare. All three airlines would benefit if Independence disappeared, but United would benefit most.
Bad blood already existed between Independence and United. Before changing its name, Independence flew as Atlantic Coast Airlines, a regional carrier for United at Dulles for 14 years.
When United went into Chapter 11 protection in 2002, it sought cheaper terms from Atlantic Coast, which refused, and the carriers parted.
Independence began serving midsize and large cities in the Northeast, Southeast and Midwest, including New York, Boston, Chicago and Atlanta. Today, Independence also flies 12 Airbus A-319s to larger destinations, but the bulk of its fleet is still small regional jets going to midsize cities such as Savannah, Ga.
It has struggled to fill planes as competitors cut fares and offered frequent-flier miles to keep passengers loyal. Its planes were 73% full in the second quarter, while major airlines filled 80% to 90% of their much larger planes.
Shares of Flyi, the Independence Air parent, fell 29% Tuesday, closing at 48 cents.
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