Tuesday, January 03, 2006

More Woes for the Airline Industry--Independence Air to shut down

I have previously discussed the dire situation of our United States airline sector: United Airlines, Delta Airlines, Northwest Airlines, ATA Airlines, US Airlines and most recently Independence Airlines--all are operating under bankruptcy protection .

The situation has gotten so bad for Independence Air, it now looks like they'll be shutting their doors (see the Jan 3, 2005 Washington Post report below).

Who will be next?

WASHINGTON — FLYi, parent company of low-fare airline Independence Air, said Monday that it will discontinue flights after Thursday evening because it could not find a buyer for its financially troubled operation.

The demise of Independence Air, based in Dulles, Va., will leave 2,700 employees out of work and thousands of passengers scrambling to find alternate flights and secure refunds. It also will cut competition in the 37 markets Independence serves, and that may lead to higher fares.

The shutdown will come two months after FLYi filed for Chapter 11 bankruptcy protection, complaining of high fuel costs and intense competition, and almost 19 months after the carrier launched service, promising low fares and coast-to-coast flights.

"Today is a sad day for Independence Air," the airline's Web site said Monday in a message to passengers. "The financial pressures in the industry have prevailed. We have run out of time."

Independence began service June 16, 2004, and once offered 600 flights a day to 47 cities. Today, it offers fewer than 200 daily departures.

FLYi said it is seeking approval from the U.S. Bankruptcy Court in Delaware to issue refunds to customers who have booked flights scheduled to depart after 7 p.m. Thursday.

Travelers holding Independence tickets for those flights must be accommodated on a standby basis by other airlines serving the same route at a cost of $50 per passenger. That provision was in a law passed by Congress to protect consumers after the Sept. 11, 2001, terrorist attacks. FLYi said passengers must book those alternative flights within 60 days after the carrier goes out of business.

Independence's frequent-flier points will become worthless at that point, but passengers can file claims with the bankruptcy court, the airline said.

The carrier flew from Sea-Tac International Airport from May to November, ceasing the direct service to Dulles after filing for bankruptcy.

The shutdown was expected.

FLYi warned as early as last winter that it might have to file for bankruptcy protection if it could not successfully restructure its operation. All last year, though, the airline held out hope that a solution to its financial problems could be found. But the company declared in its bankruptcy filing Nov. 7 that it would shut down if it could not find a buyer by January.

On Dec. 23, FLYi sent a letter to employees warning it would cease operations Jan. 7 if it was unable to find a major investor or buyer.

At least two airline companies had expressed interest in bidding for FLYi's assets. One potential bidder was Mesa Air Group, a Phoenix-based regional carrier that tried to acquire FLYi two years ago. The other was FLYi's former partner, UAL, parent of United Airlines. From 1989 to 2004, FLYi, then known as Atlantic Coast Airlines operated as a feeder carrier for United, the nation's second-largest airline.

"While we've been clear in reminding everyone that this was a possibility, we remained optimistic that there would be a way to avoid reaching this juncture," Independence Air Chairman and Chief Executive Kerry Skeen said in a statement Monday. "To date there has not been a firm offer put forward that meets the financial criteria necessary to continue operations as is."

The carrier urged customers to visit its Web site, http://www.flyi.com/, for more information, noting that its phone lines likely will be jammed.

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