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Monday, January 10, 2005

Troubled Flyi Is In Play? Load Factor Inches Up

Just as Independence Air [FLYI] cuts 150 daily flights from its future schedule, one Wall Street analyst is now recommending the stock.

Ray Neidl, an airline analyst with Calyon Securities, believes the financially troubled, low-fare regional airline may soon be in play. In an advisory opinion, he suggests that investors add the Flyi stock to their portfolios. Neidl said that Mesa Air Group [MESA] or Republic Airways [RJET] may be among the possible suitors.

A deal may only come about if the suitor has an immediate need for Flyi's 87 Bombardier [BBD] CRJ 200s. While either Mesa or Republic may secure an additional flying contract with United Airlines [UALAQ] as a result of the Dec. 10 bidding opportunity to displace Air Wisconsin in the United Express family, Neidl doubts that Flyi will secure the contract on its own. Flyi did submit a bid to rejoin the United family.

In a sale, Neidl said, Flyi may hold onto Independence as an Airbus-only carrier.

Flyi has previously said that it may file for bankruptcy if it cannot strike a deal with the lease holders of its CRJ 200 fleet. It faces a $83 million lease payment this month. The carrier refuses to say just when in January the payment is due.

In his advisory, Neidl suggested that the Flyi stock would be a good buy at $2 per share.

On Jan. 6, the stock price went up 3 cents, or 1.75 percent, closing at $1.74 a share with 1.97 million shares traded hands. Flyi delivered its own news which may have damped the stock. In December, Independence had a 54.7 percent load factor - a 2.7 percent improvement over November. December marked the first full month of the much anticipated Airbus operations to Florida resorts. In December, Independence carried 1,229 more passengers than it did in November.

Flyi also announced in a U.S. Securities and Exchange Commission disclosure that director William Rice resigned from the board. Rice, the founding CEO of Airbus Finance Co., resigned to avoid the appearance of conflict as the carrier negotiates with its lenders and aircraft manufacturers.

Independence will be cutting its 560 daily flights on Jan. 31 to 410; however, the number will pick up in mid-February with the addition of the third and fourth Airbus 319s on new Florida routes. As part of the route restructuring, Independence is cutting back on flights to Boston, Cleveland, Columbus, Indianapolis, New York, Newark, Orlando and Pittsburgh. It will also end the RJ flights to Florida from Charleston, S.C., Huntsville, Ala., and Greenville, S.C., that avoided the Washington Dulles hub.

  • In the first nine months of 2004, regional airlines carried nearly 99 million passengers - a 19 percent improvement over the same period of 2003, according statistics released last week by the Regional Airline Association (RAA). Traffic, as measured by revenue passenger miles, increased 30.7 percent over the same period of 2003 while capacity, measured by available passenger miles, grew by 26.8 percent (See table for third quarter numbers).
Third Quarter Growth
RPMs UP 27.6%
ASMs UP 22.9%
Passengers Enplaned UP 18.8%
Departures UP 7.2%
Load Factor UP 2.6 points
Passengers per departure UP 10.8%
Average trip length UP 7.4%
Source: Velocity Group for RAA
  • Last year was the safest year ever for commercial air traffic with only 11 fatal accidents worldwide, according to AirClaims. Excluding deliberate acts of violence, there were 347 passengers killed in aircraft accidents - 60 percent fewer than in the 1990s. Since 2001, the number of fatal accidents has decreased each year to a level below the previous year. AirClaims estimates that insurance losses for 2004 will be about $1 billion - about one-half of what had been expected. When analyzing the accidents by aircraft type, AirClaims notes that Western-built turboprops had 31 total loss accidents, which is close to the 1990s annual average. Eastern-built turboprops continue to show safety improvements with only nine total loss accidents.
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