Independence Air’s parent company reported a big loss yesterday, and industry analysts say the Northern Virginia airline could file for bankruptcy by January.
The airline’s chief executive officer warned of another “significant operating loss” by the end of the year amid record-high fuel prices and tough competition.
Similar problems are deepening throughout the industry.
On Tuesday, ATA Airlines became the nation’s first low-cost carrier to file for Chapter 11 bankruptcy. It is offering to sell some of its assets, including takeoff and landing slots at Ronald Reagan Washington National Airport, to pay off its debts.
Independence Air spokesman Rick DeLisi refused to comment on whether the airline would file for bankruptcy.
Parent company Flyi “is taking immediate actions to reduce costs, increase revenue and strengthen our cash position,” said Kerry Skeen, chief executive officer.
The company reported an $82.7 million loss, or $1.82 per share, in the quarter ending Sept. 30.
Independence Air, which began service four months ago as a stand-alone airline, is trying to reduce or defer $80 million in aircraft-lease payments due in January.
UBS Securities airline analyst Robert Ashcroft said Independence has a 65 percent chance of bankruptcy by January.
“It is clear to us that Flyi’s business plan isn’t working,” Mr. Ashcroft said in a recent research report for investors.
Until this past summer, Independence Air earned most of its revenue by operating regional flights for United AirIines and Delta Air Lines in the Mid-Atlantic and Midwest.
Under the new business plan, the low-cost carrier still uses Washington Dulles International Airport as its hub for flights but is expanding nationwide.
The business plan, however, was based on an assumption of oil prices around $30 per barrel, Mr. Ashcroft said. In recent weeks, the prices have escalated to near $55 per barrel, increasing Independence Air’s expenses by $100 million per year.
In addition, its 50-seat regional jets are not being filled to capacity.
In its third-quarter report, Independence Air said its load factor — or percentage of seats filled with passengers — averaged 53.8 percent. In September, the carrier sold only 45 percent of its seats.
A year ago, the airline earned a $21.3 million profit.
Among its competitors in the Washington area is Arlington-based US Airways, which filed for bankruptcy Sept. 12 for the second time in two years.
Independence Air officials downplay any risks to their business.
“We remain very confident that this is exactly the right business plan and that we’re in exactly the right market for this to be successful,” Mr. DeLisi said.
Few airlines have avoided the industry losses that total $23 billion since the September 11, 2001, terrorist attacks. Analysts predict another $6 billion in losses this year.
American Airlines, America West, Continental Airlines, Delta Air Lines and Northwest Airlines all reported third-quarter losses this year.
The only big airline to report a third-quarter profit was South-west Airlines, which earned $119 million. JetBlue Airways is expected to report a profit of $14 million, according to a Thomson First Call survey of analysts.
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