Flyi Inc., parent of struggling low-cost carrier Independence Air, yesterday announced plans to delay acquisition of 10 new Airbus jets, a money-saving move the company hopes can help avert a bankruptcy filing.
Shares of Flyi jumped 54 percent yesterday on news the airline had struck a deal with Airbus to take delivery of the 10 jets in 2007, instead of 2005, as it had planned.
The Dulles-based carrier said the amended purchase agreement will assist "the company's efforts to address its liquidity problems," according to a filing with the Securities and Exchange Commission.
"This is good news for Independence Air," said Darryl Jenkins, visiting professor at Embry-Riddle Aeronautical University in Daytona Beach, Fla. "This gives them some cash and gives them some breathing room, and that's what they need."
Last week, Flyi said in its quarterly SEC filing that it would be "forced to consider" a Chapter 11 bankruptcy filing if it could not renegotiate payments of $83 million that it owed in January on regional jet leases. Flyi blamed unexpectedly high fuel costs and "fierce competition" from larger airlines for revenue shortfalls.
Flyi did not disclose in yesterday's SEC filing how much money it will save by not taking delivery of the 10 jets next year. Rick DeLisi, the company's spokesman, declined to comment, except to say, "This is a positive step. We are in an active and ongoing process," trying to reduce debt.
Meanwhile, Goldman Sachs & Co. suggested yesterday that Flyi might be better off returning to its roots as a regional carrier.
Until recently, the company received a fixed fee for operating regional feeder jets for United Airlines and Delta Air Lines. It switched to the low-fare model in June, announcing plans to become a national carrier with service as far afield as the West Coast.
Goldman Sachs analyst Glenn Engel upgraded Flyi from "underperform" to "in line" on the possibility it may accept an invitation from United Airlines to bid on routes flown by one of United's regional feeder carriers, Air Wisconsin, which has a large presence at Dulles, operating under the brand United Express.
"Given its large losses, Independence . . . may have to reverse its strategy of reincarnating as a low fare airline and return to its fee for departure routes," Engel wrote.
DeLisi said Flyi has no plans to abandon its low-cost model.
Since its inception in June, Independence has used the same 50-seat regional jets it once operated for United. But the carrier also trumpeted its plans to acquire 28 Airbus A319 jets through a combination of purchase and lease over the next two years. Flyi took delivery of two Airbus jets this year and had contracts to acquire two more this year, 18 next year and six in 2006.
But plans to unveil the first two Airbus jets on Nov. 2 -- on new routes from Dulles to Tampa and Orlando -- were foiled when Flyi did not receive certification from the Federal Aviation Administration to operate the A319s. DeLisi said yesterday that Flyi is "very close" to getting certified.
Flyi also disclosed in last week's SEC filing that it had defaulted on an $8.7 million payment to Airbus. Yesterday, Flyi said the new deal with Airbus "eliminates the default."
DeLisi said Flyi still plans to either buy or lease the total of 28 jets. According to yesterday's SEC filing, it will accept delivery of 10 by May.
Flyi shares yesterday closed at $1.89, a gain of 66 cents, on the Nasdaq Stock Market.