Only One Airline Is Likely to Survive Regional Shakeout

Washington's hometown airlines, US Airways and Atlantic Coast Airlines, are revving their engines for the Battle of Washington, a discount-fare dogfight only one of them may survive.

In two weeks Atlantic Coast begins flights as Independence Air, a low-fare airline that plans to fly 300 flights a day out of Dulles International Airport. US Airways primarily flies out of Reagan National Airport, but Independence's low fares could lure some US Airways passengers to Dulles for flights to the same cities.

Atlantic Coast executives are betting the business on a radical transformation from a contract carrier flying feeder flights for bigger airlines into a low-cost, brand-name airline, Washington's own version of Southwest or JetBlue.

US Airways is staking its future on an even more difficult reinvention, from a traditional airline with a costly nationwide system of hubs and planes to a lean, mean flying machine.

The stocks of the two have become all-or-nothing bets, potentially valuable if the plans work, probably worthless if they fail. The two stocks are also an either-or bet because it's hard to envision a scenario in which both airlines succeed.

If Independence attracts the Dulles passengers it hopes for, a lot of them will come from US Airways. There is a 90 percent overlap between Independence Air's flights from Dulles and cities served by US Airways from the three Washington area airports.

And while Independence Air is trying to lure away US Airways passengers in Washington, Southwest Airlines is adding dozens of new flights out of Philadelphia, US Airways' busiest market.

"Southwest in Philadelphia and Independence at Washington Dulles are the two nails in the coffin for US Airways. They are why I don't think it survives," said Michael Miller of Velocity Group, a Northern Virginia aviation consulting firm, which has worked for Independence Air.

A Velocity study said Dulles is ripe for a low-fare carrier because almost all the bargain flights in the Washington region are out of Baltimore-Washington International Airport. Independence will be able take customers from full-fare carriers at Dulles and Reagan National and from discounter Southwest at BWI, Miller said.