Tuesday, November 08, 2005

Independence Air Files Bankruptcy

Dulles based (Washington D.C.) Independence Air has filed for bankruptcy.  Charging fares far below operating costs finally caught up with them, and cash reserves to cover operating costs are dwindling.  Creditors and employees are no longer willing to subsidize consumer travel by taking cuts or re-negotiating contracts for a failing business with no business plan to turn things around.
 
The Washington Post is encouraging travelers to use up or cash in their frequent flyer miles:  The Dulles-based airline said yesterday it hopes to auction some of its assets or find an equity investor by Jan. 5. Without the additional cash, most observers say it's unlikely Independence will be able to emerge.
 
And The Charlotte Observer adds:  Analysts said they believe raising money to continue operating is a longshot because the company has consistently lost money since becoming an independent airline last year.
 
I guess $29 and $49 fares isn't such a good business model after all.
 
 
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2 comments:

Joey C said...

My heart goes out to crew of Indy, but I say this with a lot of respect... they had it coming to them.

It was either ignorance of mind on their management, or just bad corporate employees. Or both. But breaking up as ACA was a mistake. FlyGirl, if you can, maybe e-mail me at admin@gcpage.com with maybe some kind of insight as to why they broke off of ACA; I doubt it was anything worthwhile.

Its simple, really.

Airline gets fed up with being a feeder for the DL Connection system, and plans their own "revolution".

Airline buys too many planes, and buys planes they dont need.

Airline charges fares that couldn't be profitable, even at 300% capacity.

Airline wonders why they're screwed.

IMO, more airlines should follow the jetBlue image. Definately.

Fly Girl said...

I don't think that the employees have anything to do with the bankruptcy filing and potential demise of Independence Air.

While I don't know all the details of their move away from being a Delta feeder (as Atlantic Coast Airways) into an independent carrier, it was part of some person's great business plan. I'm also not entirely sure if the move away from DL was entirely voluntary on the part of ACA. At this point it doesn't matter.

The plan didn't work. Just like lots of other plans that rely solely on cutting fare don't work. Until someone comes along that is willing to implement a business plans that has a reasonabale fare structure, provides for reasonable compensation for the employees, and keeps a tight reign on expenses (which includes executive compensation) the industry will continue its unprofitable downward spiral.

Cynical? Perhaps. I'd like to think it's more realistic, though.