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Rise and Fall of Independence Air

January 5, 2006 at 12:00 AM EDT
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KWAME HOLMAN: Independence Air took to the skies in June 2004, with the promise of bargain basement fares and off-beat, friendly service.

PASSENGER: We love Independence Air. We’re going to miss it a lot.

KWAME HOLMAN: Once a regional partner of United Airlines, Independence Air often under-sold other low-cost carriers. A one-way ticket from the airline’s hub at Dulles Airport outside Washington, D.C. to Chicago’s O’Hare was just $39, Las Vegas only $89.

Initially the strategy worked. Independence’s rock-bottom fares and Internet marketing inviting people to FLYi.com were a hit. At its peak last year, the airline offered 600 daily flights to 37 destinations. But in recent months, that was slashed to just 200.

It became clear the airline’s business model wasn’t working when Independence was hit with the double blow of dramatically higher fuel costs and continued competition, including from former partner, United.

David Field is editor of Airline Business Magazine.

DAVID FIELD: United was very much prominent in the death of its former servant. They were flying many of the same routes. United has a tremendous brand name, it has tremendous loyalty. And I am not suggesting that United did anything unfair except to be a good business company, to play tough, which is what you have to do to survive in business; United won in large part because of its network.

KWAME HOLMAN: In November, Independence’s parent company, FLYi, filed for Chapter 11 bankruptcy protection. On Monday, a year and a half after its inaugural flight, Independence Air announced it would ground its remaining fleet of 42 planes today.

Field says Independence ultimately was undone by its low-fare strategy.

DAVID FIELD: The fare structure early on was very attractive, and that’s based on the proof and fact that when you start an airline you have to allure to bring people in.

Because of the competitive response, FLYi I could never get to the point where fares would go up naturally.

KWAME HOLMAN: Did they cut the fares too low?

DAVID FIELD: If you are an airline in desperate straits trying to avoid bankruptcy as Independence was for the last nine, ten, 12 months of its life, you need cash coming in just to pay your bills. You need cash flow. That’s always been the case of a desperate airline.

KWAME HOLMAN: Rick DeLisi, a spokesman for Independence Air, blamed fuel prices and bad timing.

RICK DeLISI: The time is just not right to be successful in the airline industry, and despite the fact that we had extraordinary success with serving customers and creating great customer satisfaction, the economics never worked in our favor.

KWAME HOLMAN: Field says Independence was a victim of fundamental changes within the airline industry.

DAVID FIELD: We are now in the midst of a big change, the consultants call it a tectonic change. The basic economics have changed. The high-paying flyers are never coming back and fuel is going to be high for a long time.

KWAME HOLMAN: As for the workers, FLYi said most of the company’s 2,700 employees will file for unemployment benefits; 180 will stay on to close out the airline’s affairs.

Independence’s announcement came as a surprise to many passengers, who ranked it second among major airlines for customer service.

PASSENGER: It is a sad day for this company. I feel like this is — was such a nice low-cost option to be able to be a business traveler.

KWAME HOLMAN: Some travelers worried about how Independence Air’s demise would affect the cost of their next trip.

PASSENGER: Oh, I know our ticket prices are going up. I haven’t flown for $89, $98, well, it’s $198 round trip. I haven’t seen fares like that to Washington.

KWAME HOLMAN: The sudden shut down left many scrambling for an alternative way home.

PASSENGER: We actually had to change our plans and now we’re going to have to take a train back instead of flying back. It got canceled.

KWAME HOLMAN: Other carriers are required by law to honor Independence Air tickets on a stand-by basis, though passengers will have to pay a $50 fee to make the change.