Impact of Independence Collapse Unlikely to be Substantial
The collapse of Independence Air might bring small benefits to American Airlines and Southwest Airlines, but the overall impact is unlikely to be substantial, analysts said Tuesday.
Independence, a discount airline based in Chantilly, Va., announced this week that it will operate its final flight Thursday after being devastated by high fuel prices, competition and what some experts called a flawed business model.
That means one fewer competitor for the nation's struggling airlines and potentially higher fares along the East Coast. Although small, Independence pushed down fares on many routes from Dulles Airport in Washington, D.C., its home base.
"They didn't have a lot of capacity, but they were disrupting prices substantially," said airline analyst Ray Neidl of Calyon Securities in New York.
But the carrier's closing isn't likely to translate into big revenue gains for the two airlines based in North Texas.
Fort Worth-based American did not compete much with Independence, said airline consultant Michael Boyd of the Boyd Group of Evergreen, Colo. On routes where they did compete, prices are unlikely to rise because other discount airlines will continue to keep fares low.
"It doesn't affect American at all," he said.
Dallas-based Southwest may see some gains, although modest. From its hub at Dulles, Independence managed to snare some Washington, D.C.-area passengers who had been driving to Baltimore/Washington Airport to fly Southwest.
"They originally wanted to get as much as one-quarter of Southwest's market in Baltimore," airline consultant Darryl Jenkins said.
"This is good news for them."
But Neidl pointed out that Independence had already reduced much of its traffic amid high fuel costs last year.
"They sort of imploded during the summer, and Southwest got a handle on things then," he said.
The biggest winners are likely to be Delta Air Lines and AirTran Airways, which competed most frequently with Independence on its East Coast routes.
Independence was originally called Atlantic Coast Airlines and operated as a regional airline for United Airlines and Delta.
It reinvented itself as an independent discount airline in 2004 after United sought to renegotiate its rates.
At its peak, Independence flew to 37 cities from Dulles and operated about 23 percent of that airport's departures.
In 2004, airline executives said they might be interested in serving Dallas/Fort Worth Airport.
But the airline had difficulty making money because the majority of its fleet was 50-seat regional jets.
With fewer passengers, the airline's low-fare structure didn't make sense because its costs were far greater than its revenues, Boyd said.
"The math didn't work," he said.
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