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Flyi Tells Workers It Could Close Jan. 7
Employees unload baggage from an Independence Air plane at Dulles International Airport.
(By Dennis Brack -- Bloomberg News)
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"There is no future when you send a letter like this out to your employees. This is basically a cadaver they're trying to breathe life into," Boyd said. Travelers should use caution in buying tickets on the carrier, at least until the airline announces its plans, Boyd said.
If Independence folds, however, travelers holding tickets could redeem them on competing airlines for a fee of $50 each way through next Nov. 30. That provision was part of a statute created by Congress to protect consumers after the Sept. 11, 2001, terrorist attacks.
At least two airline companies have expressed interest in bidding for Flyi's assets. One potential bidder is its former partner, UAL Corp., parent of United Airlines. The other is Mesa Air Group Inc., a Phoenix-based regional carrier that tried to acquire Flyi two years ago.
From 1989 to 2004 Flyi, then known as Atlantic Coast Airlines Holding Co., operated as a feeder carrier for United, the nation's second-largest airline.
Flyi has been tangling with United since the larger carrier filed for bankruptcy protection in December 2002, then sought to renegotiate its deal with Atlantic Coast. The two companies didn't come to terms, and Flyi reinvented itself as a low-cost carrier in June 2004.
In a claim filed in the U.S. Bankruptcy Court in Chicago, where United's case is being heard, Flyi is seeking $1.28 billion from UAL -- profits Flyi says it lost because UAL terminated its contract.
Bankruptcy Court Judge Eugene R. Wedoff recently reduced the maximum amount Flyi could claim to $500 million. On Tuesday, Flyi appealed Wedoff's ruling.
If successful, Flyi, as an unsecured creditor, would collect between 5 and 8 cents of every dollar it claimed under UAL's Chapter 11 reorganization plan, said Jeff Green, a UAL spokesman.
Airline analyst Betsy Snyder of Standard & Poor's doubts Flyi's claim against UAL will save the low-cost airline.
"It's probably too little too late," Snyder said.
