Independence Airline's Demise Opens Up D.C. Gates

When Independence Air stops flying tomorrow evening after a short and bumpy existence, passengers in the region will see fewer flight options and probably higher fares in the short term.

But there could be more competition in the long run for Baltimore-Washington area travelers as other airlines jockey for the more than 40 gates Independence will leave behind at Washington Dulles International Airport.

Dulles-based Flyi Inc., the bankrupt parent company of Independence, said this week that it could not find an appropriate buyer and would cease operations.

The announcement was not a surprise to aviation experts who had dismissed the nearly 19-month-old airline's model of ultra-low fares on higher-cost small jets as untenable nearly from the start.

But while it was in business, the airline proved a thorny rival for Southwest Airlines' major operation at Baltimore-Washington International Thurgood Marshall Airport and forced down fares from Dulles - not just on United Airlines, the other major carrier there, but also on other low-cost carriers such as JetBlue Airways and AirTran Air- ways.

At BWI, Southwest Airlines did not match Independence's fares and saw some passengers in the Washington metropolitan area - which provides half the airport's business - shift allegiances for a time. Southwest said the trend reversed this summer as Independence began retreating.

"Independence's operation wasn't huge, but given that it was concentrated at Dulles, it kind of disproportionately annoyed those who operate there and around there," said Robert Mann, president of R.W. Mann & Co. Inc., an airline industry analysis and consulting firm. "The benefit will accrue to other low-fare carriers who can now choose to expand their presence - without the pricing pressure."

Independence operates in 37 cities with 200 daily flights, about half at Dulles. It has asked the U.S. Bankruptcy Court to allow it to refund passengers' tickets on flights after 7 p.m. tomorrow, when it plans to stop flying.

It's too soon to say how much more traffic will return to BWI, said Jonathan Dean, an airport spokesman.

Southwest announced yesterday that it would add direct service from Baltimore to Denver, where it just reinstituted service, starting in March. But that was not related to the Independence news, the airline said. Spokeswoman Brandy King said yesterday that the airline would continue to grow at BWI and evaluate other opportunities.

Southwest is by far BWI's largest carrier, with about half the airport's daily flights.

Dulles and BWI had been neck and neck in terms of growth in recent years until Independence helped Dulles set a one-year growth record of 35 percent from 2003 to 2004. BWI's growth was about 4 percent in the same time. In terms of passengers, Dulles served 22.9 million in 2004, versus BWI's 20.3 million.

Experts say any drop in growth at Dulles will be temporary until other carriers take Independence's gates - probably other low-cost airlines that have the resources to grow.

Rising fuel costs, labor expenses and intense competition have put several major carriers in bankruptcy protection, including United, Northwest Airlines, Delta Air Lines and US Airways. US Airways has emerged from Chapter 11 and merged with America West Airlines. United expects to come out of bankruptcy protection next month, but if it pursues more gates as some analysts expect, Dulles may not want to hand them over.

"It's going to be a free-for-all for the gates," said Anthony Sabino, a professor at the Peter J. Tobin College of Business at St. John's University in New York and an airline bankruptcy expert. "The gates are very valuable to somebody."

He said they could go to more than one airline, with the solvent low-cost carriers being the front-runners. The airport is too costly and crowded for Southwest, which relies on clear runways to maintain its on-time schedule.

Independence occupies 35 gates in the coveted Concourse A at Dulles, six in Concourse B and shares two more.

The airport has not yet determined how to award the gates, and an executive made only a brief statement about the loss of Independence, which has a 23 percent market share at Dulles.

"Our Washington market is a very strong one that has attracted numerous carriers including Independence Air, who has been a great partner at Dulles providing excellent service and demonstrating the high demand for low-fare airline service," said James E. Bennett, president and chief executive of the Metropolitan Washington Airports Authority, which oversees Dulles and Reagan National Airport. "We will continue to work with our many airlines at Dulles to meet the domestic and international air service needs of the region."

None of the experts or airlines could say yet who would add service.

AirTran, which serves BWI, Dulles and National, is looking at where it might expand.

"We haven't made any decision about that, but certainly we're taking a look at it," said Judy Graham-Weaver, an airline spokeswoman. "We monitor market conditions, and certainly when an airline goes out of business, market conditions change."

She noted that the airline rapidly expanded at BWI after the 2001 terrorist attacks led to US Airways' retreat there, and is now BWI's second-largest carrier.

Hugo Burge, president of Boston-based cheapflights.com, an online fare finder, said the airlines are becoming more discriminating about new routes or extra flights now that some of the competition - and pressure to cut fares - is easing.

"Airlines are being smart about which routes they do and don't do," he said. "This is sad news for some consumers, but it's probably welcomed by the aviation industry. This does mean we'll probably get healthier, stronger airlines, and that's for the good of consumers as well."

meredith.cohn@baltsun.com

Independence ticket holders

The airline will continue flying until 7 p.m. tomorrow and will honor all tickets until then.

If you have a reservation after then, the company is seeking bankruptcy court approval to automatically refund the fare.

If you have a round-trip reservation that departs before the scheduled cessation of service and returns afterward, you will be contacted by Independence Air and offered a chance to change your return flight at no extra charge. Passengers who change their own reservations on the carrier's Web site may have to pay a difference in fare costs.

For those not rescheduled in time on Independence, the airline is seeking the court's approval to automatically refund the fares.

There will be no refunds for free tickets or vouchers, though the tickets will be honored as long as the airline flies.

Federal law requires other U.S. airlines flying the same routes to offer stand-by seats to passengers holding unrefunded tickets for airlines that have ceased operations due to bankruptcy if contacted within 60 days. They may charge $50 one way per person.

If you've provided goods or services to Independence, the carrier intends to pay its bills.

Customers can call the airline at 800-359-3594, but expect long wait times. The company is encouraging people needing information to go to its Web site, www.flyi.com.



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