January 5, 2006: Independence Air Suspends Operations
MIAMI — On January 5, 2006 Independence Air suspended operations. A staple low-cost carrier along the east coast of the United States, Independence Air struggled to overcome great adversity during its short existence.
Independence Air commenced operations on December 15, 1989. Originally Atlantic Coast Airlines, the young airline operated as a feeder carrier for United Express and Delta Connection. With a lucrative contract from United Airlines in 1989, Atlantic Coast Airlines grew exponentially from its hub at Washington Dulles and focus city at Chicago O’Hare. Atlantic Coast operated a diverse fleet of turboprop and regional jets for United Express including Jetstream 32s, Jetstream 41s, DeHavilland DHC-8s, Embraer 120 Brasilias, and CRJ-200s.
The ambitious expansion plans led to a contract with Delta Air Lines several years later. Atlantic Coast Airlines would operate the Fairchild Dornier 328s for Delta Connection from Boston Logan, New York LaGuardia, and Cincinnati/Northern Kentucky. While only accounting for a fraction of the airline’s revenue at the time, Delta would prove vital to the company’s success.
The airline faced great adversity in December of 2002 when United Airlines entered bankruptcy protection. With nearly 80% of the its revenue coming from United Airlines, Atlantic Coast took drastic cost cutting measures to remain competitive. Unsuccessful contract negotiations with United in 2003 left the company scrambling for alternatives as they neared expiration.
With plans to terminate operations under United Express, Atlantic Coast found itself facing a hostile takeover from Mesa Airlines in the Summer of 2003. Under the deal, Mesa would purchase Atlantic Coast Airlines and take over much of the United Express operations at Washington Dulles. Just months prior to the planned takeover, United Airlines announced it had dropped the deal with Mesa. The very next day Mesa announced it would drop its bid for Atlantic Coast Airlines altogether. On August 4, 2004, Atlantic Coast ceased operating as United Express.
With no regional contract in sight, Atlantic Coast Airlines announced it would restructure as a low-cost carrier under the name Independence Air. The restructured airline would be based out of Washington Dulles and operate a fleet of largely 50 seat CRJ aircraft.
Independence was an airline like no other. Flooding the east coast market with quick flights operated by 50 seat regional jets was unique in its own right. With low fares only rivaled by today’s ultra low-cost carriers, “Fly I” had no problem filling aircraft.
With no regional contract in sight, Atlantic Coast Airlines announced it would restructure as a low-cost carrier under the name Independence Air. The restructured airline would be based out of Washington Dulles and operate a fleet of largely 50-seat CRJ aircraft.
Independence was an airline like no other. Flooding the east coast market with quick flights operated by 50 seat regional jets was unique in its own right. With low fares only rivaled by today’s ultra low-cost carriers, Independence had no problem filling aircraft.
From a branding perspective, Independence focused on being current with the architecture and technology of the times. At check in, passengers had the option to use self check in kiosks. At its Dulles hub, large monitors with flight information and contemporary architecture around the gates greeted passengers. Independence pioneered the system of renting inflight entertainment tablets to passengers similar to Alaska Airlines today. Low fares, along with funky in-flight service announcements featuring celebrities including Dennis Miller, Mary Matlin, and James Carvelle led to the rapid growth of Independence. Though common today, these minor differences made Independence unique for the era.
The End of Independence Air
The demise of Independence began almost immediately. Facing rising fuel prices and fare matching from United among others, Independence struggled to turn a profit using fuel-inefficient CRJ aircraft. To combat this problem, Independence added five Airbus A319s to its fleet. With a significantly lower CASM than the CRJ, the A319 allowed Independence carry more passengers on higher density routes. At its peak, Independence operated a fleet of 85 aircraft to 37 destinations.
The fall of Independence became public in February of 2005 when one of its aircraft was repossessed by the lessor. The carrier faced heavy criticism from the media as more and more aircraft were repossessed. In November of 2005, FLYi Inc, the parent company of Independence, declared bankruptcy. In a public filing, FLYi stated it had $378.5 million in assets, $455.4 million in liabilities and $24 million in unrestricted cash.
The search for a new owner began almost immediately with Mesa Air and United Airlines as heavy favorites. On January 2, 2006, Independence announced it would cease operations. At the time the company was down to 200 daily departures from its peak of over 600. The airline would operate for three additional days while all further bookings would be refunded or transferred to a different airline. The last flight departed White Plains, New York on January 5th bound for Washinton Dulles. More than 2,700 employees were laid off including 2,300 in the Dulles area.
Post FLYi World
In 2006, Northwest Airlines announced it would purchase the Independence Air’s operating certificate for $2 million. The resulting airline would be named Compass Airlines. Outside of being a regional airline, Compass would have very little relation to the former Independence Air.
In the immediate aftermath of Independence Air ceasing operations, fares at Washington Dulles increased. With no need to price match, United Airlines would turn Dulles into smaller yet profitable hub.
While likely to fail from the start, Independence pioneered a new type of low-cost carrier. While we have yet to see another regional try, elements from Independence can be found in Spirit Airlines and Frontier Airlines today. Though unsuccessful, Independence will forever be remembered for their unique approach to the United States market.