Updated from 12:14 p.m. EDT
Atlantic Coast Airlines
( ACAI) has picked an appropriate name for the low-cost service it plans to morph into next year: Independence Air.
The name was announced on Wednesday at the carrier's Washington D.C. hub, and it's fitting because ACA needs to fight off an unsolicited takeover bid by
in order to turn itself into a low-cost airline. The announcement follows news late Tuesday that ACA plans to purchase up to 25 Airbus planes, which will be the backbone of Independence's service.
"We are very excited that Independence Air at Washington Dulles will create America's largest low-fare hub in terms of total departures -- in the fifth-largest air travel market in the U.S.," said Kerry Skeen, ACA chairman and CEO, in a statement.
But Independence's success is not assured. For the past six weeks, ACA has been waging a bitter battle against Mesa over the future of the company. On Oct. 6, Mesa announced a hostile takeover bid for ACA, and over the last six weeks, the war of words has intensified, with both companies suing each other and government officials calling for an investigation into the takeover bid.
While the courts sort out the lawsuits, ACA shareholders of record as of Oct. 23 will actually determine the fate of ACA, deciding whether or not to replace ACA's board with one that may be friendlier to Mesa's offer. But with ACA talking up Independence, shareholders will have more to consider when weighing Mesa's bid against ACA's low-cost plan, which was announced on July 28.
"In July, we announced our move forward with the low-fare carrier and then after consideration of the unsolicited Mesa offer, our board reaffirmed those plans. The offer was rejected and we continue to move forward," said Rick DeLisi, ACA spokesperson. "This announcement is another major step forward following in the order and sequence all along."
But ACA, which hopes to launch Independence in mid-2004, can't do so until the situation with Mesa is resolved and its lingering contact issues with
unit United Airlines are sorted out. Back in late July, when ACA announced plans to become a low-cost carrier, ACA declined to renegotiate lower rates to its contract to fly out of Dulles for United, which is restructuring under Chapter 11 bankruptcy protection.
United has since signed a memorandum of understanding with Mesa to replace ACA out of Dulles -- but only if Mesa's takeover bid is successful.
Late Tuesday evening, ACA announced that it had agreements to buy 25 planes from Airbus' A320 family of aircraft, which are favored by low-cost carriers and have a smaller number of seats than the wide-body aircraft used by network carriers. All told, ACA said it will take 15 planes, 10 A319s, which seat 132 passengers, and five A320s, which seat 156. The company has an option to buy another 10 A319s.
But ACA did not reveal specifics surrounding the financing of those planes, which are valued at $1.4 billion, or what affect the purchase would have on its balance sheet or cash position, which was a major reason why Mesa was attracted to the carrier.
"Fifteen of them are being purchased through Airbus and then the other 10 are on leases with our lessor partners," said DeLisi. "We do not disclose the details of contracts and financing, which is standard in the industry."
Shares of ACA and Mesa rose in reaction to the news Wednesday afternoon. After losing more than 2% earlier in the session, ACA gained 8 cents, or 0.8%, to $10.13, while Mesa added 2 cents, or 0.2%, to $10.56.