In Danger of Bankruptcy, FLYi Amends A319 Deal

 - February 6, 2007, 4:46 AM

Independence Air (FLYi) and Airbus have agreed to change the terms of a contract for 16 Airbus A319s to allow the troubled low-fare regional to delay deliveries of 10 airplanes by two years. Under the revised deal, Independence may also swap half the airplanes for leased jets bought by lessors and scheduled for delivery next year.
Independence Air has already defaulted on an $8.7 million pre-delivery payment to Airbus. The new agreement cancels the default, according to a company SEC filing from last month. The amendment will not affect deliveries of six A319s from Airbus and another 10 leased airplanes through next May. Independence Air still has to cut or delay a separate $83 million aircraft payment due in January or face the possibility of bankruptcy.

Independence has struggled since its inception in June with weak load factors, which hadn’t finished above 50 percent in any month until it filled 52.8 percent of its capacity in October. Break-even load factors for the discount-fare industry run higher than 70 percent, and skeptics assert that the relatively high unit costs of Independence Air’s Bombardier CRJs demand even more crowded cabins.