Unable to find a liferaft, FLYi finally goes under

 - September 26, 2006, 4:27 AM

The experiment in discount-fare, 50-seat RJ flying known as Independence Air (formerly Atlantic Coast Airlines) ended once and for all when the company transported its last passenger on January 5, a year and a half after it severed ties with former mainline partner United Airlines.

Operating under Chapter 11 protection since November, parent company FLYi by last month had removed from service all but 30 of Independence’s original complement of 87 Bombardier CRJ200s, including 28 in November alone.

Now, as FLYi liquidates the six CRJs it owned and returns the remaining 24 to their lessors–including 13 more to Canadian export lending agency Export Development Canada (EDC)–the supply of 50- seat jets on the used market has for the first time approached triple digits.

By the start of last month EDC had already taken 14 Independence airplanes. It also planned to take another 15 CRJs whose leases Northwest Airlines rejected after its October bankruptcy. All told, the EDC must find homes for 42 used CRJs.

Meanwhile, FLYi awaited word from a bankruptcy judge on its request to disburse $3.2 million in bonuses to a “wind-down team” of 180 employees asked to stay on to help with the liquidation process. It also asked permission to pay salaries totaling $1.96 million and health care stipends totaling $112,000.

CEO Kerry Skeen reportedly declined any compensation; however, securities filings show the company contributed more than $2.8 million over the last decade to his deferred compensation plan. The remaining 2,520 employees would share $11.3 million in severance benefits.    

In a last-ditch effort to save the airline, FLYi asked for takeover offers from potential investors. According to its bankruptcy filing, it received only one formal bid to preserve the airline as a going concern, but the bidder did not offer what FLYi considered enough working capital to stem the airline’s losses.