Independence Air to Shut Down

The bankrupt low-cost airline says it was unable to find an investor or buyer to help it continue flying.
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FLYi

(FLYIQ.PK)

, the parent of low-cost airline

Independence Air

, is making its final flight this week.

The Dulles, Va.-based company, which filed for Chapter 11 bankruptcy protection in November, announced Monday it will stop flying Thursday evening. Last week it warned workers it would cease operations if it couldn't find a large investor or buyer. Still, it had held out hope until the very end.

"While we've been clear in reminding everyone that this was a possibility, we remained optimistic that there would be a way to avoid reaching this juncture," said Kerry Skeen, Independence Air's CEO, in a news release Monday. "To date, there has not been a firm offer put forward that meets the financial criteria necessary to continue operations as is."

The airline said it's seeking bankruptcy court approval to automatically refund customers with reservations for flights scheduled to depart after Thursday evening.

Independence will contact customers with roundtrip reservations where the return trip is scheduled for after Thursday. It will offer them the opportunity to change their return-trip reservations to one of the remaining days of operation.

Monday's news marks the end of FLYi's ill-fated experiment in transforming itself from a regional carrier making short flights for large network partners into a hip discounter a la

JetBlue

(JBLU) - Get Report

.

The company decided to strike off on its own after deciding in 2003 that a new contract offer from

UAL's

(UALAQ.OB)

United Airlines

was unacceptable. It made its maiden flight as Independence on June 16, 2004.

It couldn't have picked a worse time to become a stand-alone airline. Fuel prices rose throughout 2004 while a glut of capacity prevented individual carriers from raising fares.

But even excluding those factors, many critics said Independence never really had a chance because it was flying 50-seat regional jets, which have higher unit costs than the larger planes flown by competitors. Although the company began purchasing Airbus A319s to change its operating economics, the bulk of its fleet remained the smaller planes.