The largest shareholder of Flyi Inc., parent of Independence Air, has demanded that the struggling Dulles-based airline abandon its plan to continue as a low-fare carrier and "aggressively" pursue an opportunity to return to its roots as a regional feeder for United Airlines.
"You no longer have the luxury of blindly pursuing a strategy that will clearly require more financial resources than you have at your disposal," Edward L. Shapiro of PAR Investment Partners LP, a Boston-based private investment fund, told Flyi Chairman Kerry B. Skeen in a letter on Monday.
The letter followed a warning by Flyi on Nov. 9 that it would be "forced to consider" filing for Chapter 11 bankruptcy protection if it cannot renegotiate aircraft lease payments of $83 million that are due in January. Flyi said unexpectedly high fuel costs and "fierce competition" from larger carriers caused revenue to fall "significantly below anticipated levels."
The next day, United parent UAL Corp., which has been under bankruptcy protection since December 2002, invited Independence and nine other carriers to bid on a contract to operate as many as 70 regional jets in the United Express network. Many of those flights would originate at Washington Dulles International Airport, where Independence is based. The flights are now operated for United by Air Wisconsin.
United set a Dec. 10 deadline for bids.
"Speaking as your largest shareholder, this alternative unquestionably offers a far superior outcome to seeking the protection of bankruptcy," Shapiro wrote to Skeen and members of the Flyi board. Par Capital owns 4.5 million Flyi shares, or 9.9 percent of the company.
Shapiro said in an interview that his group bought Flyi stock only recently, hoping the airline would make a deal with United. He called Flyi's strategy to continue as a low-fare carrier "a bad dream."
Rick DeLisi, Independence's spokesman, declined to comment on the letter or on United's proposal.
Shapiro, in the letter to Skeen, called the losses sustained by Independence "horrendous" and its financial condition "dire."
Flyi became a stand-alone airline June 16 after operating as a regional feeder carrier, known as Atlantic Coast Airlines, for United and Delta Air Lines. But Independence Air has sold less than half its seats, and last month reported an $82.7 million third-quarter loss.
The value of the company's stock has fallen 80 percent over the past year. Yesterday, it closed at $2.07, up 2 cents.