Monday, 7 November 2005

Independence Air is bankrupt

Today Independence Air filed for protection from its creditors under Chapter 11 of the USA Federal Bankruptcy Act.

I’ve updated my FAQ about Airline Bankruptcies accordingly.

Independence Air is a bit different from some of the other airlines in the USA that are already in bankruptcy, in that Independence Air (since reorganizing and changing its name form “Atlantic Coast Airlines”, which had been a regional airline operating mainly as “United Express” to feed passengers to the United Airlines hub at Dulles Airport near Washington) never had a business plan with any chance of success or profitability. The idea was to operate the most expensive type of aircraft (small jets) on short routes (the most expensive per available seat mile or kilometer) for lower fares. If that sounds like a recipe for bankruptcy — well, it was. I expected them to go bankrupt.

The Independence Air announcement begins with the bizarrely cheerful statement:

We’ve joined United, US Airways, Delta, Northwest and ATA who have recently been or are still operating under Chapter 11 of the U.S. Bankruptcy Code. After carefully reviewing all our options, we decided that this course of action represents the best long-term solution for Independence Air, our customers, our employees, our creditors and the communities we serve.

Some of the statements to ticket holders and potential future ticket buyers by Independence Air — the most recent of these airlines to file for bankruptcy, and who I suspect had read my FAQ — were framed in more accurate terms than some other bankrupt airlines have used: “Independence Air is not planning to… ” rather than “Independence Air will not…”

But elsewhere on its Web site, Independence Air says :

Our flights will continue to fly as scheduled, tickets and reservations will be honored, iCLUB [frequent flyer program] members will still earn points and redeem them, and all refunds and exchanges will be made as always.

There’s no mention of, “…the bankruptcy court permitting,” although there should be.

The Independence Air bankruptcy may prompt a last-minute attempt to extend the Federal law” that gives some (limited and largely illusory) protection to holders of tickets on bankrupt airlines. That law is scheduled to expire 18 November 2005, and I hope it does: It serves (as was intended by its authors, the airlines) much more to give ticket buyers a false sense of security than to give them any meaningful protection in the event an airline goes out of business entirely.

[Addendum, 8 November 2005: Dealing with the same iussue in the UK, “The Government has decided not to accept the Civil Aviation Authority’s recommendation for a £1 levy on all air passengers departing the UK. The levy was intended to finance the homeward journeys of passengers whose airline went bankrupt while they were abroad, and refunds of the money they had lost.” The decision comes despite the CAA’s finding at the conclusion of an extensive research and deliberative process that, “over half of unprotected passengers wrongly believe they are protected; … Consumers cannot rely on other forms of protection. 90% of travel insurance policies do not cover air carrier insolvency…. Also, consumers are increasingly paying by debit cards to avoid air carriers’ credit card surcharges — but this means they lose the refund protection which credit card purchases can provide.”]

Link | Posted by Edward on Monday, 7 November 2005, 11:49 (11:49 AM)
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