It’s still a long-shot, but United requested a bid from Independence Air to operate as a United Express carrier. This is precisely the move being pushed for by Independence Air’s largest shareholder.

The Washington Dulles-based low fare carrier has been losing buckets of money and warnings have been issued about a possible bankruptcy filing in January, a mere seven months after starting service as an independent carrier. FlyI used to operate as Atlantic Coast Airlines with most of their flying as the United Express carrier at Dulles and additional activity as a regional carrier for United at Chicago and for Delta at Boston (if I recall correctly, in this last case).

The problems they face are several-fold.

They decided to sell tickets directly to consumers, bypassing Global Distribution Systems. The model works well for an established carrier like Southwest, and saves on distribution costs. But for an unknown carrier, customers simply don’t know to check FlyI.com in addition to Expedia and Orbitz. It simply doesn’t occur to someone — especially outside of Washington, DC, based in the destination cities the airline serves. Furthermore, it doesn’t comport with the way that business travelers book tickets.

As a United Express carrier, they operated a plurality of all flights out of Dulles. They leased the planes and the gates themselves. So with this tremendous ongoing capital expense, they didn’t have the luxury of starting slowly and building routes. They began with hundreds of daily flights but without the customer base to support those flights. I was recently able to book a same-day return to Pittsburgh at $29 each way. Fares are that low because loads are so low, and loads remain low even at those prices.

A mixed strategy might work for the airline. They could operate as a regional carrier for a major airline with some of their planes, guaranteeing them income and utilization of much of their capital. That would buy time to develop markets without saturating those markets with their own planes. No doubt that would be a better strategy than burning all their cash in the next few months.

Developing…