Atlantic Coast Airlines Takes a Leap of Faith with Independence Air

Strategic Insights -

Atlantic Coast Airlines Holdings Inc. is embarking on a high-risk, high-reward venture by launching Independence Air, a low-fare brand that will start service in 35 cities, including Charleston. The 14-year-old airline has severed agreements with United Air Lines Inc. and Delta Air Lines Inc., contracts that powered its growth from a six-plane operation to one of the most profitable companies in the industry. By doing so, Atlantic Coast is betting on its ability to compete against established discount carriers like Southwest Airlines and JetBlue.

Key Takeaways:

  • Atlantic Coast Airlines Holdings Inc. has launched Independence Air, a low-fare brand that will start service in 35 cities, including Charleston.
  • The airline has severed agreements with United Air Lines Inc. and Delta Air Lines Inc., contracts that powered its growth from a six-plane operation to one of the most profitable companies in the industry.
  • Atlantic Coast is betting on its ability to compete against established discount carriers like Southwest Airlines and JetBlue.
  • The airline will use regional jets, such as the 50-seat Canadair Regional Jet, which will allow it to offer more flights and quicker boarding and offloading.
  • Atlantic Coast expects to lose $48 million to $55 million in the coming 12 months and become profitable in the second quarter of 2005.
  • The airline has about $350 million in cash and short-term investments on hand, but will spend $30 million on advertising to establish its brand name.

Statistics:

  • Atlantic Coast Airlines has about $350 million in cash and short-term investments on hand.
  • The airline expects to lose $48 million to $55 million in the coming 12 months.
  • Atlantic Coast has 4,100 employees.
  • The airline plans to add 27 132-seat jets starting in the fall.
  • The airline will have 50 gates at Dulles airport, which will be its hub.
  • Only 263 seats per day are needed to break even on the Charleston to Washington Dulles route.

Sources:

  • The Post and Courier, Charleston, S.C.
  • Knight Ridder/Tribune Business News.