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Independence To End Flights On Thursday

United is Flyi's former partner and biggest competitor. United's parent is preparing to emerge from Chapter 11 bankruptcy protection in February.

Flyi's predecessor, Atlantic Coast Airlines Holding Corp., operated as a regional feeder carrier for United from 1989 to 2004. Many Wall Street analysts fault Flyi for rejecting an offer in 2003 to remain with UAL, the second-largest U.S. airline company. The offer would have cut the fixed payments United paid to Atlantic Coast to operate some of its regional flights.

Flyi instead decided in 2004 to form an independent carrier that flooded the market with short-hop, low-fare flights, most on 50-seat regional jets that are expensive to operate.

Flyi chief executive Kerry B. Skeen said in an interview yesterday there was no guarantee the company, employees or shareholders would have fared better if Atlantic Coast had stayed with United. "It's much easier in hindsight to say what didn't work," he said. "But the jury may still be out on those paths as to how well they may have worked."

Flyi suffered from rising jet fuel costs and the aggressive response of competitors, led by United and US Airways. They matched Independence's fares, added flights and sweetened frequent-flier perks. Flyi sold more than 8 million tickets, but many were at money-losing fares, including $29 one way from Dulles Airport to cities such as Newark.

The airline leases 37 airplane parking positions in Dulles's Concourse A, used for regional jets, and it shares eight slots in Concourse B, used for larger jets, from the Metropolitan Washington Airports Authority, which runs the Dulles and Reagan National airports. The fate of those slots will be sorted out in bankruptcy court, Flyi spokesman Rick DeLisi said.

A spokeswoman for the airports authority, Courtney Prebich, declined comment on the financial impact of Independence's shutdown on Dulles.

Betsy Snyder, an analyst for Standard & Poor's Corp., the New York credit ratings agency, said she expected JetBlue, which already flies out of Dulles Airport and recently bought new aircraft, to be among the bidders for Independence's slots. She said United also has been ramping up service from Dulles.

Flyi warned as early as last winter that it might have to file for Chapter 11 bankruptcy protection if it could not successfully restructure its operations. All last year, though, the airline publicly held out hope that a solution to its financial problems could be found.

Flyi declared in its bankruptcy filing Nov. 7 that it would shut down if it could not find a buyer by Jan. 7. Flyi said in the filing that it had $378.5 million in assets, $455.4 million in liabilities and $24 million in unrestricted cash on Sept. 30.

On Dec. 23, Flyi sent a letter to employees warning that the airline would cease operations Saturday if it was unable to find a major investor. At least two airline companies, UAL and Mesa Air Group Inc., have expressed interest in bidding for Flyi's assets. Mesa, a Phoenix-based regional carrier, tried to acquire Flyi two years ago.

"While we've been clear in reminding everyone that this was a possibility, we remained optimistic that there would be a way to avoid reaching this juncture," Skeen said in a statement yesterday. "To date there has not been a firm offer put forward that meets the financial criteria necessary to continue operations as is."

Staff writers Keith L. Alexander and Dean Starkman contributed to this report.


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