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Independence Air ceases operations, asks court to distribute assets
By Dan McCue
Staff Writer
Independence Air will fly no more.The struggling discount airline, the only low-cost carrier serving Charleston International Airport, discontinued operations at 7 p.m. on Jan. 5.
The last scheduled Independence Air flight between Charleston and Washington Dulles International Airport departed that afternoon at 5:20 p.m.
FLYi Inc., the Dulles, Va.-based parent company of the airline, said in a written statement that the decision to discontinue service was based upon “continued financial challenges facing the company.”
The low-cost carrier began service on June 16, 2004, when it ended its Atlantic Coast feeder operation for United Airlines and recast itself as Independence Air. FLYi filed for Chapter 11 protection in November.
According to papers filed with the U.S. Bankruptcy Court for the District of Delaware, Independence Air has lost nearly $500 million.
The announcement of the airline’s demise came as the Charleston County Aviation Authority and FLYi’s other creditors were awaiting the outcome of an auction of its assets in Delaware. However, at the 11th hour, the airline asked the bankruptcy court to suspend the auction process.
U.S. Bankruptcy Judge Mary F. Walrath scheduled a series of hearings, beginning on Jan. 5, to consider a motion by Independence Air that it be allowed to reject its remaining leases and “abandon” its remaining owned aircraft.
FLYi also asked the court to establish deadlines for their airline’s creditors to take possession of the aircraft and other equipment.
David Jennings, chairman of the Charleston County Aviation Authority, said that like everyone else, he had been waiting for the other shoe to drop since FLYi filed for Chapter 11 protection.
“The fact that they are going to auction always seemed to be a fairly dramatic remedy, in my opinion,” Jennings said. “Every carrier serving Charleston is either currently in bankruptcy or has been, and an auction of assets is not a remedy any of the others has sought.”
When the auction was scheduled, the company indicated it was accepting bids in three categories, including bids of investment that would have allowed it to continue as an independent carrier.
Independence Air Chairman and CEO Kerry Skeen said in the written statement that there had “not been a firm offer put forward that meets the financial criteria necessary to continue operations as is.”
Prior to the auction both United Airlines and Mesa Air Group of Phoenix announced they’d bid on Independence Air’s planes, gates and equipment. There was also speculation in the airline industry that Frontier Airlines and Richard Branson’s start-up, Virgin America, had also submitted bids for the troubled airline’s assets.
Ian S. Fredericks, an attorney for FLYi, confirmed that the auction, scheduled for Jan. 3, had been cancelled, but declined to comment on the fate or status of the bids that were made.
“There’s really nothing more that I’m at liberty to say,” said Fredericks, of the Wilmington, Del., law firm of Young, Conaway, Stargatt & Taylor LLP.
In the wake of its decision to cease operations, FLYi also asked Judge Walrath for permission to automatically refund customers with reservations for flights scheduled to depart beyond that time, as well as those whose return flights had not yet been scheduled.
The timing of Independence Air’s end came as something of a surprise, as only days earlier the airline had set a different deadline. In a letter to its union employees, including pilots, flight attendants and mechanics, FLYi said that without “significant external investment,” it would stop flying Jan. 7 and lay off workers at all of its locations by Jan. 21.
FLYi’s labor agreements required it to serve notice of intent to furlough its workers. The airline employed about 2,800 people nationwide, and 13 full-and part-time employees in Charleston.
Prior to the auction of Independence Air’s assets, several of its creditors filed petitions with the bankruptcy court seeking to reserve their rights in regard to contracts that might be transferred to another carrier through the auction.
The Charleston County Aviation Authority did not file a similar petition with the court, Jennings said.
At the time of its Chapter 11 filing, the airline owed the authority about $40,000, representing fees related to about six weeks of flights to and from the airport, Jennings said.
“It would be nice if we recovered that money, but we’re just one of a long list of creditors,” he said. Asked his expectations, Jennings said, “Let me put it this way: we’ve made no plans to spend that money.”
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@charlestonbusiness.com.
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