Independence May Not Trouble Ua Much Longer

[WorldTraveler]

FlyI's financials today were nothing short of absolutely horrific. With financials that bad, their pricing has had to negatively affect UA first based on the biggest overlap as well as DL and US who also compete in just about every O&D Independence serves. See details of the financials at:
http://biz.yahoo.com/prnews/041027/dcw040_1.html

A few highlights indicate how badly DH's operation has become:
Operating margin is nearly -50% meaning every dollar in revenue results in 50 cents in losses.
FlyI burned through $100 million (round figure) in cash in the quarter - and revenue still includes Delta connection flying. (UA flying continued well into the quarter as well).
Revenues dropped by half while costs rose by 25% (fuel cost increases only amounted to about 20% of total increased costs).
Operating CASM was over 20 cents; even if special charges and fuel increases are eliminated CASM was still nearly 16 cents.

FlyI has been slashing fares to fill seats but still managed to fill only 64% including UA and DL flying.

Such destructive behavior is certainly affecting United, Delta, and USAirways but can't go on much longer. Perhaps FlyI's plan now is to go to bankruptcy to get rid of a bunch of the RJs and try to compete using the Airbus.
One way or the other, DH will probably be a thorn in UA's side for a while but certainly can't remain in the present form for long.

 

[ualdriver]

I agree. I wish them no ill will either.

I think their consolidated 3rd quarter results will make UAL's results look like a winner!

And their financial problems over there are deep. I mean, even if fuel went down 50% AND every employee on the property worked for free, they still would have had an operating loss. The numbers would have been worse if they had not included some of the express flying they were doing.

Somehow, I just don't think they're going to be a thorn in our side long term. A few Airbi's flying a small % of their total seat miles aren't going to save them, and I think they have an inherently high cost business model (hub and spoke RJ's, c'mon now) that's not compatible with the fares they are charging.

And what are they going to do in bankruptcy besides get VERY small? Squeeze the lessors for lower lease rates for aircraft that I imagine are quite desirable (RJ's and A319's) probably with little success? Squeeze labor (it's those damn overpaid pilots again!) for a cut when labor is only 23% of their total costs anyway? Their best hope is to find someone FAST they can fly as an express for. Then again, everyone has an opinion : )

 

[iflyjetz]

Their cash burn rate averaged better than $1 mil/day for last quarter; I'd be surprised if it's less than $1.5 mil/day this quarter. With $198 mil cash on hand minus $40 mil restricted, they'll burn down to $100 mil unrestricted before Thanksgiving.
I don't know how they could emerge from Chap 11 without having $100 mil cash on hand upon entry. That begs another question ... who will provide DIP financing and at what rates?
The one bright spot for Independence is that they've inked an agreement with Galileo systems (used by travel agents) to list flights. Do many people buy tickets through travel agents anymore? I guess they're working on other outlets to list their tickets also. Given that we're entering the winter season and all competitors have been close to matching Independence's fares, I don't think this will save Independence.
My best guess is that they declare chap 11 no later than mid-Jan (when lease payments are due) and go chap 7 before June 2005.

 

[Busdrvr]

Time to get rid of the puts and shorts, I'm thinking a $2-$3 offer from old Johnny O could be in the works.... 😉

 

[funguy2]

FlyI burned through $100 million (round figure) in cash in the quarter

[post="195538"][/post]​

Read more carefully World Traveller... They burned $100mil YTD... Their cash on hand at the end of 2Q04 was $345mil... So between the end of 03 and June 04, they raised about $50mil, and burned almost $150mil in the 3Q04. Thats $1.6mil/day.

Depending on where the restricted cash falls (whether or not it is a subset of Cash, Cash Equivalents, and Short Term investments as discussed in another thread) their current cash is between 98 and 123 days of cash... Or 3-4 months. Logic must suggest something happening either immediately before or after Christmas.

 

[iflyjetz]

Time to get rid of the puts and shorts, I'm thinking a $2-$3 offer from old Johnny O could be in the works.... 😉

[post="195660"][/post]​

I don't think so. Independence is imploding so rapidly, Johnny O will probably wait to pick up the RJs from the lessors. I'd say that's the only part of the company that Johnny O's interested in.
I guess that the market for 50 seat RJs has started to get a bit soft anyway.

 

[FWAAA]

Read more carefully World Traveller... They burned $100mil YTD... Their cash on hand at the end of 2Q04 was $345mil... So between the end of 03 and June 04, they raised about $50mil, and burned almost $150mil in the 3Q04. Thats $1.6mil/day.

Depending on where the restricted cash falls (whether or not it is a subset of Cash, Cash Equivalents, and Short Term investments as discussed in another thread) their current cash is between 98 and 123 days of cash... Or 3-4 months. Logic must suggest something happening either immediately before or after Christmas.

[post="195706"][/post]​

The reported $40.6 million of restricted cash is in addition to the $198 million of cash and cash equivalents, assuming that their current presentation is consistent with their 2Q 10-Q:

http://www.sec.gov/Archives/edgar/data/904...w99643e10vq.htm

With $80 million of lease payments due in Jan 2005, the future doesn't look too bright at FLYi, Inc.

 

[UnitedChicago]

where's C54capt? :blink:

 

[iflyjetz]

The reported $40.6 million of restricted cash is in addition to the $198 million of cash and cash equivalents, assuming that their current presentation is consistent with their 2Q 10-Q:

[post="195892"][/post]​

The $198 mil includes $40 mil restricted. Unresticted is $157.4 mil. Errr, make that WAS, as of Sep 30. If they're burning through $1.6 mil/day, they had $114.2 unrestricted this morning before they opened up shop. They'll have to declare chap 11 before Thanksgiving.

 

[FWAAA]

The $198 mil includes $40 mil restricted. Unresticted is $157.4 mil. Errr, make that WAS, as of Sep 30. If they're burning through $1.6 mil/day, they had $114.2 unrestricted this morning before they opened up shop. They'll have to declare chap 11 before Thanksgiving.

[post="195905"][/post]​

I'm in complete agreement with you that FLYi is burning up its cash at an unsustainable pace, but I disagree that the restricted cash is a subset of the $198 million of cash and marketable securities.

The 2Q 10-Q supports my view.

On Dec 31, 2003 (according to the 10-Q), cash and marketable securities totaled $298 million and restricted cash was another $14.8 million. It is possible for current cash and marketable securities to include some restricted cash (USAir's numbers included some restricted cash included in current assets and some resticted cash not included in current assets), but at 12/21/03, there was no restricted cash included in the $298 million.

In yesterday's earnings release, you can see that these same numbers appear as of 12/31/03. Unless FLYi is reporting its 3Q numbers inconsisently with its prior presentation, you can be confident that the $40.6 million of restricted cash shown as of 9/30/04 is in addition to the $198 million.

Still, Independence Air won't be operating independently much longer. B)

 

[funguy2]

Excellent research FWAAA

 

[C54Capt]

where's C54capt? :blink:

[post="195902"][/post]​

United Chicago,

You summoned me? What is your question? I have no interest in DH and am curious as to your post.

 

[Borescope]

Amazing,
A year ago when everyone was hot and heavy on UAL demise, most of the UA supporters were saying leave us along and worry about your own airline. Now a little bad news from the other airlines and it seems as if the UA posters are gloating over it. Don't forget there was a loss of 270+ for UA's 3rd quarter and this is suppose to be the most profitable one. There is a long winter ahead.

 

[uafa21]

Flyi could be around a very long time in BK. UAL is a perfect example. Our results today were dismal at best, a $272 M third quarter loss and this was when loads were in excess of 80%.

This thing is going to be hard to turn around. It makes me wonder what jind of cuts they will ask for.

 

[UnitedChicago]

Yea I hear ya. Believe me I'm not wishing any airline fails. Flyi tried to and is still trying to screw United. That's why I think a lot of United folks are discussing their situation.

C54 - I thought you worked for Indy. My mistake. The only reason I summoned you is someone kept up the argument during the ACA UA spat that the reason ACA was moving to Indy was because of the concessions United was seeking in the contract.

It was well documented by Skeen that they were plotting strategy to become a low fair, stand alone pre United's ch11.

I thought you were the one making this argument.

Amazing,
A year ago when everyone was hot and heavy on UAL demise, most of the UA supporters were saying leave us along and worry about your own airline. Now a little bad news from the other airlines and it seems as if the UA posters are gloating over it. Don't forget there was a loss of 270+ for UA's 3rd quarter and this is suppose to be the most profitable one. There is a long winter ahead.

[post="195959"][/post]​