Flyi Inc, the parent company of Independence Air, will cease operating Jan. 7 if it is unable to find a major investor or buyer, the airline said in a letter received by its employees this week.
In the letter to its unionized workers, including pilots, flight attendants and mechanics, the Dulles-based airline said that without "significant external investment," it would stop flying in 10 days and lay off workers at all of its locations from Jan. 7 to Jan. 21.
Flyi filed for Chapter 11 bankruptcy protection in November. At that time, the financially struggling carrier said it was searching for a major investor, and absent that would sell off its assets.
The airline mailed the letter to comply with labor agreements requiring it to serve notice of intent to furlough its workers. The carrier employs 2,800 people.
Despite the letter, Independence spokesman Rick DeLisi said that the airline's fate was far from sealed and that the carrier still had a "number of ongoing discussions" and was still "exploring" a number of options.
"No definitive decision has been made," he said. DeLisi declined to comment further.
Independence Air pilot Patrick J. Devney, who has worked for Flyi and its predecessor, Atlantic Coast Airlines, since the company was formed in the late 1980s, received his furlough letter by regular mail Tuesday.
"I lost my mother on Dec. 11, so I had been dealing with that," said Devney, who lives in Jefferson, Md. "I was anticipating this letter, but it's still kind of stressful."
Devney, who said he earns a minimum of $9,000 a month as an Airbus captain, is making plans for another job. But it may not be in the airline industry.
"The problem is I'm 47 years old and I have 13 years left to fly legally, before mandatory retirement," he said. "But when an airline goes bye-bye your seniority usually doesn't transfer with it. We have guys who are 58 years old and will have to take a 60 to 70 percent pay cut if they want to start all over at another airline."
Meanwhile, the airline continued to accept advance bookings from travelers for as far out as April.
Michael J. Boyd, an analyst at the Denver-based consulting firm the Boyd Group, said it was unlikely Independence would find an acquirer that would be willing to keep the airline afloat. Instead, Boyd said it was more likely that any potential investors would buy some of the airline's assets.
"There is no future when you send a letter like this out to your employees. This is basically a cadaver they're trying to breathe life into," Boyd said. Travelers should use caution in buying tickets on the carrier, at least until the airline announces its plans, Boyd said.
If Independence folds, however, travelers holding tickets could redeem them on competing airlines for a fee of $50 each way through next Nov. 30. That provision was part of a statute created by Congress to protect consumers after the Sept. 11, 2001, terrorist attacks.
At least two airline companies have expressed interest in bidding for Flyi's assets. One potential bidder is its former partner, UAL Corp., parent of United Airlines. The other is Mesa Air Group Inc., a Phoenix-based regional carrier that tried to acquire Flyi two years ago.
From 1989 to 2004 Flyi, then known as Atlantic Coast Airlines Holding Co., operated as a feeder carrier for United, the nation's second-largest airline.
Flyi has been tangling with United since the larger carrier filed for bankruptcy protection in December 2002, then sought to renegotiate its deal with Atlantic Coast. The two companies didn't come to terms, and Flyi reinvented itself as a low-cost carrier in June 2004.
In a claim filed in the U.S. Bankruptcy Court in Chicago, where United's case is being heard, Flyi is seeking $1.28 billion from UAL — profits Flyi says it lost because UAL terminated its contract.
Bankruptcy Court Judge Eugene R. Wedoff recently reduced the maximum amount Flyi could claim to $500 million. On Tuesday, Flyi appealed Wedoff's ruling.
If successful, Flyi, as an unsecured creditor, would collect between 5 and 8 cents of every dollar it claimed under UAL's Chapter 11 reorganization plan, said Jeff Green, a UAL spokesman.
Airline analyst Betsy Snyder of Standard & Poor's doubts Flyi's claim against UAL will save the low-cost airline.
"It's probably too little too late," Snyder said.