Independence Air managers say airline isn't going bankrupt

Independence Air lost $82.7 million over the last three months, but airline managers say they're not going bankrupt. And there is confidence, not concern on the part of industry watchers.

"We are actually happy to see losses at $82 million," says Danni Varlan, who heads East Tennesseans for Airfare Competition. "The anticipation was it could've been a lot worse."

Independence Air's third quarter financial report came out Wednesday. The $82.7 million in losses compares to a net income of $21.3 million for the third quarter 2003. Total operating revenues for the third quarter in 2004 were $119.6 million, compared to $221.0 million in the third quarter of 2003.

"We continue to have confidence in the Independence Air business plan," Independence Air Chief Executive Officer Kerry Skeen said during a web cast Wednesday, when the company released its financial report.

But, the business plan is based on fuel being much less expensive than it is now.

"For this third quarter, we averaged a fuel cost of $1.47 per gallon compared to $1.07 per gallon in the third quarter last year," Chief Financial Officer Richard Surratt said.

The financial picture doesn't sound pretty, but Varlan says it's not supposed to.

"They never anticipated making a profit this quarter or next quarter," she explains. "And, I don't think anybody that's started a business, especially if you're buying airplanes, anticipates seeing a profit in their first year or so."

Besides higher fuel costs, Surratt blames stiffer competition for his airline's financial struggle.

"We've seen intense competition in our market," Surratt told investors. "Not only did most competitors match our fares, but we've also seen additions to capacity and routes in our markets that we quite frankly had not expected."

To compensate, Independence Air is cutting back on flights from some cities, but not Knoxville.

Independence Air is adding bigger planes to some routes in the coming months. That adds to debut, but will mean more seats to sell, enabling the airline to make more money.

Managers say they're not going bankrupt, and customers should keep booking, because they say, they'll keep flying. "I'm booking them," Varlan says. "I feel perfectly confident with what their future will be."