ATW Daily News

Independence Air seen running out of cash by year end

Monday May 2, 2005

Independence Air is likely to have only around $5 million in cash by year end, a level that is "inconsistent with continued operations," JP Morgan analyst Jamie Baker stated in a report released Friday.Furthermore, with "no identifiable assets to leverage," debtor-in-possession financing for Independence "appears elusive." The airline, which markets itself as FLYi, lost $192.2 million in 2004 and ended the year with $169.2 million in cash and short-term investments, according to Baker. He forecasts it will lose $183.2 million this year.

Should Independence shut down, the biggest beneficiary is likely to be United Airlines, which Baker expects would pick up "nearly all" of the carrier's nonstop revenue, estimated at $200 million annually. It would pick up another $50 million of connecting revenue, leaving $150 million to be shared by 11 carriers, with Delta taking the most at $37 million, followed by American at $27 million and Continental at $19.2 million.

Although Baker figures that AirTran Airways will capture only $3.4 million in revenue, FLYi's disappearance should have a positive impact on that airline's yield because Independence offers fares in markets that account for 29% of AirTran's revenue. His estimate: AirTran yield could improve 16% if Independence goes away.

by Perry Flint

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