Flyi's Demise Sets the Stage For Higher Fares

At Dulles International Airport, Bora Min, 23, gets a boarding pass for her Independence Air flight to Chicago after visiting her parents.
At Dulles International Airport, Bora Min, 23, gets a boarding pass for her Independence Air flight to Chicago after visiting her parents. (By Katherine Frey -- The Washington Post)

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By Keith L. Alexander
Tuesday, January 3, 2006

It was June 16, 2004, the first day of service for Independence Air. The gates at Dulles International Airport were transformed into a party with bright blue balloons, champagne and a jazz band. Employees were clapping and dancing at the gate, celebrating the launch of the nation's newest low-fare airline.

Independence Air chief executive Kerry B. Skeen boarded each flight leaving Dulles to thank the passengers for flying the new airline that he created from what had been a feeder line serving major airlines. The new airline even handed out inaugural flight certificates to its first passengers.

Passenger Courtney Cotta joked with other passengers that she was going to put her certificate "in a special place" in case the airline didn't make it. "I wonder how much I would be able to get for it on eBay then," Cotta mused at the time. Now Cotta can find out. The airline's parent company, Flyi Inc., yesterday gave notice that it would shut down Thursday evening.

Passengers -- particularly those in Northern Virginia -- who had grown fond of the airline will now have to find an alternative to many small to mid-size cities in the Northeast and Midwest.

And Independence passengers weren't the only Washington area travelers who benefited from its short tenure. The airline played a significant role in keeping fares low in the area. With ticket prices as low as $29, Independence forced major airlines such as United, Delta, US Airways and even Southwest to lower their fares on competing routes.

Fares from Dulles to various cities dropped 30 to 65 percent in the first quarter of 2005, with the average fare declining as much as $110, according to a September report by the Transportation Department. In the same quarter, fares nationwide had begun rising. Before Independence launched, Dulles had the sixth-highest fares in the nation, according to the Transportation Department. After Independence arrived, the airport's fares dropped dramatically, with Dulles falling to the 25th-highest-priced airport, according to the report.

Now, many industry analysts say airlines will have greater ability to raise their ticket prices. "The fares are going to go up. They have to," said Michael J. Boyd, president of the Boyd Group, an Evergreen, Colo.-based consulting firm. "Think of Independence Air as being a two-year-long Santa Claus to small communities. Well, Santa Claus just ran out of money."

Unlike some airlines that have gone out of business abruptly, Independence gave its employees and travelers some advance notice. The airline began offering refunds to customers last week. A week earlier, it alerted employees that it might have to cease flying on Jan. 7 if it did not find a buyer. In the past two weeks, the airline processed about 250 refunds, said spokesman Rick DeLisi. The airline has to wait for bankruptcy court approval, which it plans to seek later this week, before offering more refunds, DeLisi said. He suggested that travelers holding reservations contact their credit card companies to seek immediate refunds.

For those Independence customers who have tickets for coming weeks and choose not to seek a refund, Independence reminded its customers of a federal law that requires other airlines that compete on the same route to accommodate Independence passengers on a standby basis for a $50 fee each way. But that depends on whether the competing airline has available seats on a similar flight. "Other airlines have to honor the tickets. That's the law. But I can't predict what other airlines will do," DeLisi said.

Independence launched with rock-bottom fares and with as many as 17 flights a day from Dulles to such cities as Boston, Atlanta and Raleigh, N.C. But the airline struggled trying to fill its 50-seat planes because of the number of flights. Many flights took off half-empty. At the same time, fuel prices soared to near-record levels. And competitors slashed their prices, awarded bonus frequent-flier miles, and added flights on routes where they competed with the beleaguered airline.

By the time Flyi filed for bankruptcy protection, Independence was down to 210 flights a day from 600 a day. "The airline never went well," said longtime airline analyst Darryl Jenkins. "Right from the beginning, they were hit with very high costs. The airline gods were not kind to Independence Air."

© 2006 The Washington Post Company

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