Shares of Independence Air parent

FLYi Inc.

(FLYI)

soared as much as 32% Tuesday as investors appeared hopeful the airline might be able to avoid filing for bankruptcy protection.

Investors may also be speculating that the company, which transformed itself this year as a low-cost carrier along the lines of

Southwest

(LUV) - Get Report

and

JetBlue

(JBLU) - Get Report

, may try to return to its past as a regional carrier, operating flights under contracts with large network carriers, said Brian Hayward, senior equity analyst at Zack's Investment Research.

The analyst said he would revisit his "strong sell" rating on FLYi shares if the company abandons its low-cost strategy. "It's a much more predictable operation if they go back to the regional contracts," Hayward said. (Zack's does no business with FLYi, and Hayward holds no position in the company's stock.)

Shares were up 34 cents, or 18.0%, to $2.23 on volume of 7.7 million shares.

The stock has now reversed all of the losses incurred after the airline warned last Tuesday of an imminent liquidity crisis if it can't restructure financial obligations. Notably, Independence Air said $83 million in regional jet lease payments come due in January.

On Monday, the stock went on a tear as investors seized on news that Independence had reached an agreement with Airbus to defer the delivery of 10 A319 jets until 2007. Delivery was originally set for next year. The agreement means Independence Air is no longer in default on $8.7 million in predelivery payments, and the company said the deal assists its efforts to shore up liquidity.

Gains probably also received a boost Monday after Goldman Sachs upgraded the stock to "in line" from "underperform."

But even with the deferment of the Airbus jets, FLYi is far from solving its financial problems, Hayward said. "Deferring the Airbus deliveries helps them get immediate liquidity, but the $83 million due January is still there, and they're still burning cash," he said. "Their strategy was to take those Airbus jets and make longer-haul flights out of

Washington Dulles International Airport, and that strategy has been delayed by pushing those deliveries back."