=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/c/a/2005/05/04/BUGOSCJG9U= 1.DTL --------------------------------------------------------------------- Wednesday, May 4, 2005 (SF Chronicle) Cake and concern greet arrival of Independence Air at SFO/Low-fare airline = moves westward amid cash worries David Armstrong, Chronicle Staff Writer San Francisco International Airport, moving to complement its strength in international flights with popular low-cost domestic airlines, welcomed discounter Independence Air on Tuesday with speeches and a frosted cake adorned with small jet airplane figures. Even as the party was getting started, however, airline industry analysts cast doubts on cash-strapped Independence's prospects. Its costs are too high, and its fares are too low, they say. Formerly a feeder airline called Atlantic Coast Airlines, Independence w= as renamed in 2003. It reinvented itself as a low-fare airline in 2004 after it couldn't agree on contract terms with United Airlines, for which it flew United Express regional jets. Independence made its first daily nonstop flight between SFO and Washington Dulles airport, where it is based, on Sunday. It started nonstop service from Dulles to San Jose, Seattle and Los Angeles the same day. Most of its markets are in the East and Midwest. Independence, which flies blue-and-white planes, is being marketed as a casually stylish airline, a la established JetBlue Airways. Rick DeLisi, Independence Air's director of corporate communications, wo= re a blue shirt sans necktie or suit to an airport news conference Tuesday. "No ties, no jackets, no hassles. That's just who we are," he said. Also, maybe, not enough money. As Independence Air was gearing up for its West Coast expansion, J.P. Morgan airline analyst Jamie Baker wrote that it might have only $5 million in cash by year's end, a sum "inconsistent with continued operations." Independence lost $192.2 million last year, Baker said. He predicts a lo= ss of $183 million this year. DeLisi acknowledged that the airline faces difficulties and will lose money again this year, but said, "The economics of the entire industry are terrible right now. The challenges we are facing are not unique to us whatsoever." "Eventually, great fares and great service" will take Independence into the black, he said, noting that United and US Airways, its rivals at Dulles airport, "are deeply entrenched in long-term bankruptcies." Zacks Equity airline analyst Brian Hayward said Independence Air is losi= ng money so fast that it "could be below $10 million in cash by the end of the year." Hayward said Independence is bleeding cash chiefly because it has been unable to lock in, or hedge, costly jet fuel at fixed rates and because most of its planes are inefficient 50-seat regional jets. Small jets cost more to operate per seat mile than larger planes. The airline serves West Coast markets, including SFO, with new, 132-seat Airbus A319s. SFO is easily the major Bay Area airport for overseas travel, with more than 90 percent of passengers. New international service is set to start this spring with Iceland Air, next winter with Air India and possibly by year's end with Emirates Airlines. However, SFO's efforts to land increasingly popular cheap-ticket airlines for domestic travel have fared less well. Discounter ATA, which serves SFO, is in Chapter 11, and industry analysts' dim views of Independence Air could cloud its SFO service just as it's getting off the ground. Last June, after a long, very public national derby, SFO was chosen as operational headquarters for low-fare Virgin America Airlines. But the startup has yet to line up financing and appears a long way from flying. SFO has also lured AirTran and WestJet in the past 18 months. "Our effor= ts (to land discounters) aren't going to stop," said Airport Director John Martin. Independence, AirTran and WestJet "provide the kind of service we want: low-cost, long-haul, transcontinental," he said. Discount kings Southwest Airlines and JetBlue use secondary airports like Oakland International instead of major hubs like SFO because landing fees and other costs are lower. Martin said SFO is talking to a wide range of airlines, including low- fare carriers and startups. "We're going to keep going after it," he said. E-mail David Armstrong at davidarmstrong@xxxxxxxxxxxxxxxx --------------= -------------------------------------------------------- Copyright 2005 SF Chronicle