Independence Air To Shut Down

"Today is a sad day for Independence Air," proclaimed the company's website. "Today we must announce that we will be ceasing scheduled service operations this Thursday evening, January 5. The financial pressures in the industry have prevailed. We have run out of time." Some excerpts:

It has been an amazing 18 months. We set out to challenge the status quo and to re-set your expectations about air travel. We set out to introduce you to lower fares and a new level of service delivered by employees who care. Currently ranked #2 in customer satisfaction among all US airlines, we are proud that we did indeed earn your respect and loyalty. We are proud that we built a brand so universally praised by over 8 million customers. We are proud of the mark we have made.

Customers with reservations whose trips are completed between now and Thursday evening should expect the same great service for which we have become known.

Additionally, we are seeking bankruptcy court approval to automatically provide refunds to customers holding reservations on flights occurring after our shutdown of operations on January 5th. No refunds will be offered for free tickets or vouchers.

Today is a sad day for Independence Air. Today is a sad day for our customers who have gotten used to tender loving service and paying less for air travel. We will miss serving you. Thank you for your vigorous support.

"We offer our sincere thanks to the over eight million customers who have flown with us since the launch of Independence Air, and to the communities across America that we have served," said CEO Kerry Skeen. “And most importantly, we thank our extraordinary employees for creating an airline brand that has been so universally praised by our customers. Our people have demonstrated that they are capable of operating an airline that quickly rose to the top of the rankings in every major independent survey of airline quality and customer satisfaction. And while this is a profoundly sad day for all of us, we could not be more proud of our employees and everything they have accomplished.”

Well, it's sad to see Independence Air go. Yet other airlines - particularly United - are most likely breathing a sigh of relief. In its year and a half of existence, it lowered fares dramatically out of its Washington Dulles hub - which it shares with former partner United. And its demise is not totally unpredictable.

Ever since 1989, Atlantic Coast Airlines had a steady contract with United and Delta, flying small jets under the United Express/Delta Connection banner from Dulles (IAD) and later, for United at Chicago-O'Hare (ORD). But after United filed for bankruptcy in 2002, ACA decided to declare its independence and leave its partners. It started flying as Independence Air in July 2004.

But it isn't possible to be charging those low fares while flying expensive aircraft like those CRJs. The Indy Air business model was flawed from day 1, and its mangagement was too, perhaps, for making the switch. Of course, United did want to re-negotiate its contract with ACA while in bankruptcy, and perhaps ACA should have agreed to a lower paying contract. But that's all over - and the sixteen year carrier is coming to an end.

United will be watching this carefully, and they will most likely try to prevent this - another carrier attacking its Dulles hub - again. It's already going to bid for Indy Air assets - probably its gates - and we'll find out the results of the auction tomorrow. But with AirTran and jetBlue also eyeing Dulles, it had better watch out too.