Short on cash, Indigo ceases regular service

 - July 28, 2008, 10:36 AM

Indigo, the provider of “regular and frequent” business jet service between Chicago Midway Airport and Teterboro Airport in New Jersey, suspended flights early last month, three months after a relaunch of operations on March 3.

“We fell short on the equity side,” said Indigo chairman and CEO Peter Pappas, by way of a terse explanation. “For the time being, we’re going to focus on our charter and corporate business.”

Indigo had originally started flights between Midway and Teterboro in February 2000, using 10-passenger Falcon 20s. The service was advertised as “regular and frequent” and operated under Part 380 of DOT regulations as an “indirect” air carrier. The Part 380 authorization allowed the company to deal with the public and sell seats. Sister company Air-Serv holds the Part 135 certificate that allowed it to “physically and directly” operate the aircraft on behalf of Indigo. The idea, said Pappas, “was to fill a market niche between regularly scheduled airline service and the available corporate, charter and fractional-ownership alternatives.”

Operations with the Falcon 20s were suspended last year, pending the February relaunch with the company’s first 16-passenger Embraer Legacy Shuttle. The company subsequently accepted delivery of another Legacy Shuttle, the second of a firm order for 25.

With Indigo service suspended, the two aircraft are now available for charter with Air-Serv while Indigo tries to raise another $15 million to $20 million in private equity. The company has laid off nearly a dozen employees.

If successful, Indigo was hoping to begin service again this month, but this time between Midway and Westchester County Airport in White Plains, N.Y.

The change of airports was prompted in part by mounting opposition from community groups in the Teterboro area with the backing of Rep. Steve Rothman (D-N.J.). Rothman and others contend that Indigo, despite its Part 380 approval, was in essence a scheduled airline service, operating in disregard for the Port Authority ban on scheduled airline service at Teterboro Airport.

Most recently, Rothman managed to add a measure to the FAA reauthorization bill that would prohibit operations at Teterboro that mimic those of a scheduled airline.

Indigo’s original founders raised the $19 million that went into its initial Falcon 20 service. Chicago-based investment advisory firm Lunn Partners LLC raised $10 million for the relaunch operation and, according to the Chicago Tribune, is again involved in this latest attempt for new funding. The Tribune also quoted Pappas as saying that Indigo plans to increase its direct target marketing to zero in on highly compensated professionals who are not deterred by the one-way fare of $749.