The parent of low-cost carrier Independence Air said yesterday it lost $82.7 million in the third quarter of this year, a development that will mean higher fares and reduced service to some cities, the Dulles-based airline said yesterday.
The loss reported by Flyi Inc. compared with a $21.3 million gain in the third quarter of 2003, when the company -- then known as Atlantic Coast Airlines Holdings Inc. -- operated feeder flights for larger carriers, a markedly less risky venture. The company expects to post a "significant" loss in the fourth quarter as well, Flyi chief executive Kerry B. Skeen told analysts.
Third-quarter revenue fell to $119.6 million from $221 million, a 46 percent decline.
Independence Air plans to raise fares from an average of $60 to the mid-$70s by this winter and to reduce flights. For example, in December it will offer eight flights between Dulles and Atlanta instead of 16. Service to Boston, Newark, Raleigh, N.C., and John F. Kennedy International Airport in New York also will be reduced, according to Skeen.
Flyi has a $98 million payment due in January on the lease of its regional jets. Skeen said that the airline is trying to negotiate with creditors to delay or reduce the payments it owes and that it plans to raise cash by selling a few jets. Independence Air, which has been flying with half-empty planes, hopes to gain greater visibility among travel agents by contracting with online reservation systems that charge airlines a fee for every ticket they sell. Skeen said the company already has made a deal with Galileo International Inc. Currently, Independence sells tickets through its own Web site and toll-free telephone number.
Flyi officials also announced they will have to delay plans to operate the airline's first 132-passenger Airbus A319 jets. The airline had planned to fly them starting Wednesday to Tampa and Orlando. But the Federal Aviation Administration has not yet certified Flyi to operate them, Skeen said. Those markets will be served temporarily by regional jets.
Flyi finished the third quarter with $198 million in cash and short-term investments, down from $345.4 million at the end of the second quarter. Some analysts worry that the company is running through cash too quickly. "With the difficult winter months coming up, you'd certainly like to have more cash," said Anthony F. Cristello, an analyst for BB&T Capital Markets. "I'm suspect. I don't know if they are going to be able to do enough to stave off" a filing for Chapter 11 bankruptcy protection.
Another analyst, Robert N. Ashcroft of UBS Investment Research, last week said there is a 65 percent chance Flyi will file for Chapter 11 reorganization, probably in January. UBS last week downgraded Flyi's stock, and bond-rating agency Standard & Poor's put the company on its watch list. On Monday, Moody's Investors Service downgraded Flyi and declared that the company has a "negative" outlook.
Skeen said in an interview that the company has a plan to improve its liquidity by the end of the year. "We are working very hard to see that we have the resources to weather this storm," he said. "We're still bullish on the business plan. We think long-term that the Independence strategy here at Dulles is going to work."
The company's shares closed yesterday on the Nasdaq Stock Market at $1.40, down 15 percent from the previous day and down 77 percent from June 16, when Independence debuted. A year ago, the stock was trading at more than $12.
