Flyi Is Latest Airline in Bankruptcy Protection

In its filing, Flyi told shareholders to expect the worst: full cancellation of the company's stock "without consideration, in which case Flyi stock would have no value."

It was nearing that point yesterday. Flyi began trading at $6.01 when the company made its first flight but closed yesterday at 7 cents on the Nasdaq Stock Market.

Among analysts and competitors, there was an I-told-you-so attitude. Some had said from the beginning that the company was trying to do too much too soon -- offering service to 39 cities, for example, in its first few months. Skeen has said he had no choice. When what was then called Atlantic Coast Airlines Holdings Inc. broke off from United, it had leases on 87 regional jets that he did not wish to keep idle.

The breakup came after United, which filed for bankruptcy protection in December 2002, tried to reduce the fixed payments it made to Atlantic Coast.

"Flyi was guaranteed to fail, and it will eventually go out of business," said William H. Alderman, a Connecticut-based aerospace investment banker.

In late 2003, before launching Independence Air, Skeen went to court to fight off a hostile takeover bid by Mesa Air, which had offered about $512 million for the company.

Yesterday, Mesa chief executive Jonathan G. Ornstein called Flyi's bankruptcy "unfortunate and avoidable."

"The company had alternatives, and it chose not to pursue them," he said.

Some analysts and investors had warned Skeen that his only hope of survival was considering an opportunity last winter to return to its roots as a feeder carrier.

PAR Investment Partners LP, a Boston-based private investment fund, became Flyi's largest shareholder late last year on the hopes that would happen.

"They had opportunities to preserve value and they decided to completely shun them," said Edward L. Shapiro, a PAR partner. "Their argument to me was that, 'Oh, it would have been a lousy margin and we couldn't have made any money.' That may be true. But, versus what? Versus the negative operating margins they have operated with Independence Air?"

PAR sold all of its Flyi shares in the months before the bankruptcy filing.

Shapiro predicted no investors would step up to rescue Skeen's operation.

"I don't think they can raise the capital to continue to fund an operation that clearly is not viable," he said. "I can't come up with a scenario that this entity makes any sense at any size. What do they have? They have 12 relatively new [Airbus] planes. There's some value there. They have a name brand, if that's worth anything. But I can't imagine that it is."

Despite the company's financial troubles, it did develop a following among passengers, between its low fares and broad-based marketing efforts.

At a Dulles terminal yesterday, David Leggett was on his way back to Boston on an Independence flight, worried that the company's bankruptcy could disrupt a family schedule that includes a Christmas trip home for his son, an American University student, and his own trip back to watch an AU swim meet in two weeks.

"We'll see what happens," he said.

Washington Post staff writers Keith L. Alexander and Elissa Silverman and researcher Bobbye Pratt contributed to this report.