FLYi files for bankruptcy, to auction assets
 

Low-fare airline Independence Air has filed for bankruptcy protection, its parent company FLYi Inc. (FLYI.O: Quote, Profile, Research) said on Monday, adding that it would seek to auction itself.

<b>http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh6639 6_2005-11-07_12-27-34_n07504977_newsml</b>

Not even slightly surprising, but too bad, anyway.

There is a very strong rumor that Richard Branson, will use this opportunity to start his long talked about Virgin America airline, buying the equipment and routes. As a forigner, he could only own 25% of any airline (directly), so this may take a while to set-up, some say at least a year, but it may be good news to the employees and keeping the routes competative. He does have deep pockets, so his survival chances are a lot better than FLYi.

What happened to his plan for a LCC based in SFO? Did he realize SFO (and California) isn't a cheap place to do business?

FLYi provided what all kinds of apologists for airlines who treat coach passengers badly always say is the market's first priority: low fares. Did FLYi cut prices too far? Or treat passengers badly? Or overreach their resources? Or did competitors get predatory just long enough to drum them out of business?

Independence Airlines started off with a faulty business model. Regional jets are not low-cost to operate.

Two other factors help its demise. First, it sold its tickets only directly initially, not through other booking agents, resulting in very low load for several months. Second, the high fuel cost.

In what sense are regionals not low-cost to operate? I mean, all major carriers and many regionals have switched considerable numbers of their routes over exclusively to CRJs and the like. FLYi's &quot;model&quot;, it seems to me, was to emulate the short spokes of a hub (i.e., United's). A little plane takes less fuel than a big plane and, presumably, it's cheaper to have one junior-level pilot and one attendant than a pilot qualified on the huge jets plus several attendants - so in an absolute sense, it is cheaper than a big plane. But of course, they expected to fly full -- the way their competitor's regionals do often because the demand for seats in those &quot;spokes&quot; and short-hauls (if you can call 3 hrs. to Toronto short) exceeds the number available. But if they hadn't at least been partly right about their strategy, their competitors wouldn't have been forced to reduce prices until FLYi disappeared.

Seemed to me that they overreached their resources often, though -- didn't have a really good structure for maintenance away from Dulles, overextended their ground personnel, esp. at Dulles. Where gate agents (and it sure looked like baggage handlers too) at other airlines were covering one flight at a time, FLYi's were handling 3 to 6.

They also did, it seemed to me, a lousy job of promotion, esp. away from WashDC. Their destination cities got almost no advertising and people were still unfamiliar with the airline a year after start up.

A 50-seat CRJ costs a lot more per available seat-mile than a 737 used by Southwest or a 717 of AirTran. You'll still paying for pilots (though cheaper), landing fees, gate agents, but with only 40% of seats for sale.

The major airlines fly RJs to connect smaller markets to their hub, so passengers can then fly on their higher-yield mainline and international routes.

And add to the mistakes that you and I have descibed, there's one more. There are a portion of flying public who hate RJs, or who will not fly RJs. On markets with 737/320 competition, you lose market share by only offering a CRJ.

That's a shame! i'm from the uk, but have used them a number of times whilst i've been in the states, and found them to be a great airline, and could certainly teach a few uk budget airlines a thing or 2