Independence bails out with Chapter 11 filing By Doug Cameron in Chicago FT.com Updated: 11:12 p.m. ET Nov. 7, 2005
Independence Air, the US low-fare carrier, on Monday accelerated its hunt for a partner or buyer after its parent company filed for bankruptcy protection in an effort to preserve adwindling cash pile.
The long-awaited move comes 18 months after the Washington-based airline transformed itself from a feeder for two major airlines into a standalone player in the ultra-competitive east coast market.
Independence ranked as only the 25th-largest US airline by capacity in the first half of 2005, but its rapid expansion since relaunching had contributed to the weak revenue environment on east coast routes.
The carrier, formerly known as Atlantic Coast Airlines,said it was "maintaining a dialogue" with 30 interested parties,and had set a deadline of January 5 to complete a sale or auction.
Airline financiers expressed doubt that established carriers such as AirTran or JetBlue would come in to rescue Independence or pick up its assets. Liquidation or a sale tostart-up or even foreign-backed investors - such as those pursuing Sir Richard Branson's long-delayed Virgin America project - is seenas the most likely outcome.
The bankruptcy filing had been long expected by airlineanalysts following sustained losses and doubts about thecost-effectiveness of a strategy operating both A319 jets and smaller 50-seat Canadair regional jets.
Independence said it plans to continue operating 12 A319sand 30 CRJs, but will ground another 28 smaller jets and seek to reject the leases on most of them. The airline had already shrunk capacity by a quarter, cutting most of its services to the west coast, laid-off staff and shelved further Airbus deliveries.
It had just $24m in unrestricted cash at the time offiling in the Delaware bankruptcy dourt, with most rival US carriers forecasting substantial losses in the traditionally weakfourth quarter, exacerbated by high fuel costs.
Independence was a regional partner of Delta and United before rejecting new contract terms from those carriers and ahostile bid from Mesa Air, a larger regional carrier focused on the western US. It is suing United for more than $1bn because of the contract changes.
The airline cited high fuel prices and "extreme revenue weakness" for its filing in a Delaware court, though many airlineexecutives believe the US industry may have touched bottom as capacity comes out and fare levels start to improve.
Independence joins United, Delta, Northwest and ATA in bankruptcy protection, and like its rivals will use the court to pursue fresh dealswith employees and financiers.
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