Fly i Bankruptcy

Independence Air filed for Chapt 11 this morning.

I had expected them to do it before the "witching hour" to take
advantage of the old rules. I attributed the fact they didn't to
inability to obtain a loan to continue operating. Their condition
must be pretty dire.

They are now asking the court to conduct an auction of the airline.
which I think confirms my guess that no one would lend them money.

In some ways this is amusing. I recently saw a list of the top 10 US
airlines in terms of customer satisfaction. This is the second to go
out of business. I suppose that Southwest & Continental which picked up
the last two places should be worrying and plan some service cutbacks.

Robert J Carpenter wrote:

Independence Air filed for Chapt 11 this morning.

I had expected them to do it before the "witching hour" to take
advantage of the old rules. I attributed the fact they didn't to
inability to obtain a loan to continue operating. Their condition
must be pretty dire.

They are now asking the court to conduct an auction of the airline.
which I think confirms my guess that no one would lend them money.

In article ,
"Frank F. Matthews" wrote:

In some ways this is amusing. I recently saw a list of the top 10 US
airlines in terms of customer satisfaction. This is the second to go
out of business. I suppose that Southwest & Continental which picked up
the last two places should be worrying and plan some service cutbacks.

When a company declares chapter 11, it does not go out of business. As
for Southwest, it is one of the few airlines that consistently earns a
profit so its unlikely to go bankrupt any time soon.

Shawn Hirn wrote:
In article ,
"Frank F. Matthews" wrote:


In some ways this is amusing. I recently saw a list of the top 10 US
airlines in terms of customer satisfaction. This is the second to go
out of business. I suppose that Southwest & Continental which picked up
the last two places should be worrying and plan some service cutbacks.


When a company declares chapter 11, it does not go out of business. As
for Southwest, it is one of the few airlines that consistently earns a
profit so its unlikely to go bankrupt any time soon.


Neither case involved Ch 11.

Cyrus Afzali wrote:


No, they don't. But they have to possess enough assets to convince
their creditors to work things out with them. In the case of
Independence, they really don't have that many assets, so a
liquidation is likely.

Since United has been having issues with their lessors
(a third of their fleet, I believe), would acquiring
Independence's line of new A320's be of interest to
them? UA could get rid of their oldest 737's faster
as well as walk away from leases. Plus the Indie
planes are newer than their own A320's and A319's
(half their LCD screens are shot, based on recent
flights between ORD and PDX or SJC or DEN; audio
doesn't work on 1 out of 8 flights; upholstery
is ratty ... in Economy Plus!!).

"Gary L. Dare" wrote in message
...
Cyrus Afzali wrote:


No, they don't. But they have to possess enough assets to convince
their creditors to work things out with them. In the case of
Independence, they really don't have that many assets, so a
liquidation is likely.

Since United has been having issues with their lessors
(a third of their fleet, I believe), would acquiring
Independence's line of new A320's be of interest to
them? UA could get rid of their oldest 737's faster
as well as walk away from leases.

Do people that lease planes let you 'walk away'?

Surely if you've made a commitment you're expected
to stick to it.

tim

"tim (moved to sweden)" wrote in
message ...

Do people that lease planes let you 'walk away'?

Surely if you've made a commitment you're expected to stick to it.

That, sir, is part of the reason why United is in Chapt 11. If they
can convince the judge, they can walk away from any contract. Neat,
isn't it.....

But the Independence A320s are leased as well. Why would United want
to pay (probably higher) leases for new planes instead of their ratty
old 737s? You'd have to save a lot on fuel and repairs to make it
worthwhile.

Robert J Carpenter wrote:

But the Independence A320s are leased as well. Why would United want
to pay (probably higher) leases for new planes instead of their ratty
old 737s? You'd have to save a lot on fuel and repairs to make it
worthwhile.



Good point, I didn't realize that. Apparently i-Air
owns few of its own planes and is already trying to
dump the leases on some 50 seat RJ's ...

http://www.usatoday.com/travel/news/...lyi-usat_x.htm


United's motivation would be to replace their oldest
737's, which are fuel guzzlers, quicker and sooner.
Even while cutting flights domestically, United can
still fill planes at the right price on many routes
so the bigger A320 on a lease, after exiting CH-11,
is an alternative to buying the newest 737's.

http://www.chicagobusiness.com/cgi-bin/news.pl?id=17962

gld

P.S: I believe that UA's 737's are the -200 and -400?

Cyrus Afzali wrote:
The main thing to remember is that since UA is still in bankruptcy,
anything and everything they do has to be approved by their board AND
bankruptcy trustee. It's doubtful that they would allow UA to cancel
an existing, binding contract just so they can get a better deal

Actually, that is what bankrupcy protection is all about. All of the
airlines that have recently visited Chapter 11 or equivalent had
renegotiated aircraft leases, returned aircraft to lessors etc.

Since 9-11, there has been a glut of certain types of aircraft available
for leases and that has driven down the value of those aircraft. Lease
costs are based on the value of the aircraft.

Bankrupcy judge can void existing leasing contract and force
renegotiation at current market rates, resulting in leases that are far
less costly. And since leases are considered "debts", this also greatly
reduces the debt for the airline and makes it easier for it to exit from
bankrupcy protection. (In practice, the threath of voiding the contract
is enough to make the lessors renegotiate the leases).

In the case of United, it had negotiated with unions for special deal
for the shuttle operation on the west coast with the caveat that it
would be limited to the 737. Not sure if these clauses are still in
place or if United managed to zap this and made the shuttle operation on
par with TED for instance. If the 737 clauses are still in place,
United couldn't get rid of its 737s and put in 320s.

Since lessors contribute a large portion of the money needed to exit
from bankrupcy, it is a balancing act between reducing the airline debt
(reducing the amount of cash needing to be injected to get airline back
up) and protecting its leasing revenus by ensuring the airline retains
as many aircraft as possible.

Certain aircraft are easy to move to another airline. Widebodies and
747-400s can find new onwers in asia quite fast. But narrowbody aircraft
, especially older ones, don't have such an easy time finding new lessors.

Many years ago, the CP regional carrier in Québec decided to split off.
It called itself Intair and started to compete against AC and CP on
routes such as Montreal-Toronto. It didn't last. CP ended up buying the
failed outfit and re-integrated it into its network as Inter-Canadien,
and then later sold it off to get cash while making sure it remained a
regional carrier for CP. (which didn't survive the AC-CP merger).


Independance is similar. It split off from its mainline clients (mostly
71% United and 29% Delta). It is obviously not working out. Their only
hope now is to get some white knight to buy the outfit and use it as a
regional carrier. The presence of A320s is a hindrance since they can't
be operated in a regional airline context.

United would have a very hard time justifying a rescue of Independance
Air to its judge.

Also, you need to look at the CRJ-200 market. Bombardier has already
stated that they will go from a production rate of 18 per year (down
from 130+ in 2001) to a big fat 0 in janurary. Independance has already
let go of 20. (some of which were adopted by Air Canada instead of
buying new ones).

Comair has indicated it would have to reduce its fleet to reduce costs
to help its parent Delta emerge from bankrupcy. In effect, there will be
a large glut of flying skidoos melting away in the desert. (The
Fredericton airport should make a large snowy parking lot for all the
flying skidoos that are no longer needed :-)

Mesaba is also in banckrupcy protection due to NW's bankrupcy and will
also shed regional aircraft. (I think Saabs are already slated for reduction).

American doesn't have baby skidoos (-200s). So none of the mainline
operators in the northeast would really gain anything from buying Fly-I
(formerly ACA).

In fact, they would all benefit from the total disapearance of the airline.


The number of skiddos released to the used market will probably result
in Bombardier keeping the production line shut for at least 2 years.

BTW, ACA had signed a 10 year contract in 1999 with United garanteeing
profitabilitty. But in 2003 decided to break off because United (already
in bankrupcy) decided to change the terms of the contract.

http://www.usatoday.com/travel/news/2003/07/29-aca.htm

Provides a very good overview of the situation at the time ACA decided
to break off from United and Delta in 2003.

JetBlue has so far purchased nothing but new aircraft. Does FlyI's 320s
have the same engines ? They might be able to work out a deal with
Airbus to cancel future deliveries in exchange for preventing FlyI's
320s from going into the used market.

One thing I forgot to mention.

In 2003, Mesa Airline made a failed and hostile attempt to buy ACA. It
might succeed now. However, there is not much of a point to buy it if it
can't find a mainline carrier willing to use (and pay for) its regional services.