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Independence Confronts More Bleak Numbers

By Bill Brubaker
Washington Post Staff Writer
Friday, May 6, 2005; Page E01

Can an airline that offers many of its passengers lower fares than a Greyhound bus ever expect to make money?

Quite likely, said Kerry B. Skeen, who heads 10 1/2-month-old Independence Air. The airline said yesterday that it expects to report a $105 million first-quarter loss. "We have the possibility to approach break even in the June-July time frame . . . and we're forecasting that we'll be profitable in the second quarter of '06," Skeen said in an interview.


Independence Air has been putting a happy face on its cut-rate service, but financially, the carrier is doing badly. (Alex Wong -- Getty Images)

Quite unlikely, said Jamie Baker, an analyst for J.P. Morgan Chase & Co. "Time appears to be running out," he wrote in a report for investors last Friday. "We believe Independence will exhaust its cash by year-end."

Flyi Inc., parent of the Dulles-based airline, called its first-quarter results preliminary because the company has been restructuring its operations and said losses could be greater. "Not a pretty quarter," said Skeen, the company's chairman and chief executive.

Flyi's stock price has reflected the poor results.

Since last June 16, when the company transformed itself from a profitable feeder for larger airlines into a low-cost carrier, its stock has plummeted 86 percent.

Yesterday, Flyi stock fell 9 cents a share to close at 83 cents on the Nasdaq Stock Market, the 15th straight day it closed below $1. The stock's performance has raised concerns among Flyi executives that the company could be delisted by Nasdaq, which Flyi said would create severe financial burdens.

Flyi has lost $265 million in the past three quarters. Skeen said the gloomy first-quarter numbers were expected, given the high cost of becoming a stand-alone carrier. High fuel prices haven't helped, either. As early as last fall, Skeen said a filing for Chapter 11 protection from creditors was possible if the company couldn't raise some cash and win some concessions from creditors. Flyi did, selling aircraft and spare parts.

But the expected first-quarter result illustrates how difficult Flyi's transition has been.

The $105 million first-quarter loss ($2.28 per share) compares with a profit of $3.6 million (8 cents) in the first quarter last year, when the company operated feeder flights for United Airlines and Delta Air Lines. Revenue fell 49 percent, to $90.9 million.


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