State of the Airlines

Wednesday, February 16, 2005

NEWS: The Bankruptcy Vortex Pulls at Independence Air

Flyi, parent of Independence Air, disclosed today that they have skipped an interest payments due in January. Flyi has been busy trying to restructure its lease deals with several creditors to ease the immediate debt burden. Unfortunately they've only worked out a deal with GE to date. That leaves them needing deals with several other lendors to cover another 27 aircraft (sorry make that 26). In other words they've got a lot of work to do in a short period of time. 30 days to be more precise. See lenders tend to get a little testy when you don't cover the interest payments, especially really big ones. So if Flyi can't get new lease deals that relieve some financial burden and make good on the interest payments in the next 30 days then their next move will be involve the number 11...normally preceded by Chapter.

There are a couple of important questions. First, what's the market value on the aircraft that Independence Air is operating. Industry analysts seem to think not so much...which is a good thing for the carrier. This puts them in a better position to get more favorable terms. Second, should Indy Air have to go into bankruptcy what are their chances of exiting. Not good in my opinion. Independence Air faces increasing competition from AirTran, Southwest, JetBlue and even Delta. Fuel prices remain brutal. In fact, I'm of the opinion that even if they dodge this bullet that their days are numbered.