Indy Air Warns Of Bankruptcy

[ngneer]

Sadly but not surprisingly, Independence Air announced awful quarterly results and warned of a possible bankruptcy filing. Outright liquidation is possible. It was tough enough trying to be a LCC with high-cost RJs, but with oil around $60 a barrel they just don't have a chance.

Indy Air warns of bankruptcy

 

[whlinder]

It isn't because of oil, even if you eliminate what they paid for fuel and their one-time items ("long-term aircraft impairment" or something, I can't remember offhand) they still would have lost money. Oil is making them lose it a lot faster, but their business plan has not been working and they have been too stubborn to try to change it.

 

[mrfish3726]

Oil closed at $65 dollars a barrel today!

 

[runway4]

Not a huge surprise, but still hard to think of the hardships folks will have to face.

I wonder if B6 will pick up any of the slack in key markets. Anyone know what the top O/D markets out of IAD are?

 

[whlinder]

Not a huge surprise, but still hard to think of the hardships folks will have to face.

[post="287501"][/post]​

That is the saddest part; luckily the unemployment rate around IAD is very low (3% was the last figure I heard) so hopefully all those folks won't be out of work long.

Of course, that low unemployment rate has made it awfully damn expensive to live here.

 

[runway4]

Independence Air Gets Reprieve

By Ross Snel
TheStreet.com Staff Reporter

FLYi Inc. (FLYI:Nasdaq - commentary - research), the parent of Independence Air, will bolster its coffers by postponing some airplane deliveries, a move that may help the cash-strapped airline avoid bankruptcy, at least for now.

On Thursday, the Dulles, Va., company said airplane maker Airbus agreed to defer deliveries of six A319 planes originally scheduled for 2006. Independence has 16 of the planes on order and now plans to receive six in the second half of 2007, six in 2008 and four in 2009.

In return, Independence will receive a $31.2 million refund from Airbus. Airbus also will let Independence put off $11.5 million in other payments scheduled for the rest of this year, and the carrier has canceled $16.5 million in debt it had issued to finance some of its airplane payments.

The airline disclosed the news in a filing with the Securities and Exchange Commission.

Shares gained a penny to 46 cents. Over the past year, the stock has lost almost 90% of its value on bankruptcy fears.

Formerly a regional carrier for UAL's (UALAQ:OTC BB - commentary - research) United Airlines and Delta Air Lines (DAL:NYSE - commentary - research), the company struck off on its own as a hip discounter in June 2004. The move proved poorly timed however, as fuel prices were on the rise just as industry overcapacity was making it difficult for individual carriers to raise fares.

The skyward march of fuel prices is showing no signs of stopping, confounding airlines. Crude oil futures hit new highs above $65 Thursday after logging another record close Wednesday.

Independence has been burning through cash, ending the second quarter with only $66 million in unrestricted funds. The quarter's loss of $98.5 million, or $2.01 a share, was significantly higher than the Wall Street forecast for a loss of $1.24 a share.

In a quarterly filing this week, the company offered a dire forecast, saying its cash wouldn't cover obligations for the rest of the year and it might have to file for bankruptcy protection.

Although the latest move will give Independence some needed liquidity, analysts have warned that deferring A319 deliveries won't help the airline's cost structure because the Airbus planes have lower unit costs than the smaller regional jets that make up the bulk of Independence's fleet.

 

[coolflyingfool]

The $31 MM will help, but if they can lose a ton of money for their size in the 2nd quarter, I am thinking the 3rd quarter can be only slightly better. And thats only if fuel prices come down. Just my thoughts..........

 

[ngneer]

Although the latest move will give Independence some needed liquidity, analysts have warned that deferring A319 deliveries won't help the airline's cost structure because the Airbus planes have lower unit costs than the smaller regional jets that make up the bulk of Independence's fleet.

[post="287574"][/post]​

That is why this reprieve is only going to postpone the inevitable. It won't postpone it for long because they're burning through cash at a pretty fast clip. Still, there's nothing else can they do at this point except to try to stay afloat as long as possible and hope for a miracle.

Whlinder is absolutely right, FLYi's business plan was flawed from the beginning. They seemed to recognize that by trying to shift to Airbuses, but the clock is just about to run out.

 

[A330US]

why dont they sell off their CRJs and then keep the A319s coming in

 

[SVQLBA]

why dont they sell off their CRJs and then keep the A319s coming in

[post="289479"][/post]​

There are no buyers out there for 50 seat CRJs. They are probably EETC financed anyway, not owned, which makes things trickier