- The Washington Times - Wednesday, November 19, 2003

Atlantic Coast Airlines announced its new airline, called Independence Air, yesterday at Washington Dulles International Airport, pledging to use the airport as a hub of low-fare service to cities nationwide.

Service is scheduled to begin in the first half of 2004 with more than 300 daily departures from Dulles, many of them along the East Coast to about 50 mid-size cities. The airline hopes to draw many of its customers from the Virginia suburbs.

The airline also plans to operate coast-to-coast flights with 25 Airbus jets it acquired in a $1.4 billion deal late Tuesday.

“We’re going to make Dulles the largest low-fare hub in the country,” said Kerry Skeen, Atlantic Coast Airlines chief executive officer.

Atlantic Coast Airlines opens the airline under a siege of legal challenges.

It is trying to free itself from contracts to operate United Airlines’ regional jet service and to withstand a hostile takeover attempt by competitor Mesa Air Group.

Independence Air will operate under a bold new business plan that combines characteristics of major airlines and discount airlines.

Like major airlines, it will use a hub of operations at Dulles Airport with frequent service throughout the day. Discount airlines do not use hubs, preferring instead to fly between any cities where they can pack the most passengers into airplanes.

Independence Air will fly to mid-size cities with a fleet of mostly 50-seat regional jets. Most airlines use larger jets and fly between major cities. Officials have not announced which cities they will serve.

Mr. Skeen said he encountered many skeptics about whether relatively small regional jets could bring in enough revenue to operate profitably.

“We’re willing to take calculated risks,” he said to a group of about 2,000 at the Atlantic Coast Airlines hangar, most of them employees.

Independence Air will make money from efficient operation, such as keeping airplanes flying an average of 14 hours a day rather than the 10 hours typical of major airlines, he said.

“We’re not planning to compete with any other low-fare airline,” said Rick DeLisi, Atlantic Coast Airlines spokesman. “We’re planning to extend the concept of low-fare airline service to markets and routes where it doesn’t exist today.”

The flights will start as soon as Atlantic Coast can win court approval to terminate its contracts with United Airlines, whose parent company, UAL Corp., is in bankruptcy.

Atlantic Coast earns about 80 percent of its revenue from the regional flights it operates for United Airlines under the name United Express.

Most of the rest of its revenue comes from similar contracts with Delta Air Lines.

Meanwhile, Mesa Air Group continues to appeal to Atlantic Coast’s stockholders to approve a hostile takeover. Phoenix-based Mesa also operates United Express flights.

Atlantic Coast is accusing Mesa Air Group in a lawsuit of conspiring with United Airlines to eliminate competition through the takeover attempt. Mesa denies the charges.

Despite lingering legal concerns, Atlantic Coast officials say they are determined to operate as an independent airline.

“I want to get out from underneath the thumb of United right now,” said Tom Moore, Atlantic Coast’s chief operating officer.

Under the deal, Atlantic Coast is purchasing 15 Airbus regional jets and leasing another 10. They will be added to the fleet of 87 regional jets that the airline already operates. The Airbus jets seat from 132 to 156 passengers.

Independence Air will offer fares as much as 70 percent lower than other airlines on some routes, Atlantic Coast officials said.

Mesa officials have predicted Atlantic Coast cannot withstand the debts of operating independently, such as the Airbus purchase.

They issued a statement yesterday saying the introduction of Independence Air would not alter their takeover plans. They said they would monitor “the impact of these developments on the value of ACA [Atlantic Coast Airlines] and consequently its offer.”

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