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Upgrade Lifts FLYi From Low

The parent of Independence Air gets a much-needed boost after warning of a Chapter 11 filing.
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Shares of Independence Air parent

FLYi Inc.


reversed some of Wednesday's steep loss after a Merrill Lynch analyst raised his rating on the stock from sell to neutral.

Independence Air is among the carriers United Airlines' parent



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has asked to bid on some of its regional United Express business, and that could prove positive for the stock, wrote Merrill Lynch analyst Michael Linenberg in a research note. (Merrill Lynch does and seeks to do business with companies covered in its research reports.)

The stock was up 18 cents, or 13.9%, at $1.48 Thursday. On Wednesday, Independence Air shares tumbled 61 cents, or 31.9%, to $1.30 after the company warned it could seek Chapter 11 bankruptcy protection if it can't reschedule aircraft lease payments that come due in January.

"At the last close of $1.30, the stock is clearly discounting a very high bankruptcy probability," Linenberg wrote. "However, we think the United announcement alters the risk/reward profile of the security. Hence, we are raising our rating on Independence Air from sell to neutral ... but stress that this is a name to be considered by only our most aggressive accounts."

Late Wednesday, United Airlines said it was seeking bids for regional flights currently flown by Air Wisconsin. Before FLYi began a new life as low-cost carrier Independence Air this year, it operated as Atlantic Coast Airlines, providing regional service under contracts with United and

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Given recent challenges, such as hurricanes and high oil prices, FLYi's board must seriously consider the company's course and contemplate returning to regional-jet contracts before it runs out of cash, wrote Linenberg.