Who decides who FLIES and who DIES?
It's no secret, but it bears repeating.
"Whoever controls the volume of money in any country is absolute master of all industry and commerce." -- President James A. GarfieldThe folks at Independence Air learned that the hard way. They are taking their last flight Thursday after only 19 months in operation and despite apparently good customer ratings:
"We've flown them quite a bit. They had a lot of flight options and good prices," said Chris Turpin, 37, of Indian Rocks Beach, Fla., who also gave high marks to the friendly staff.But apparently, high marks and booming demand mean nothing in this market.
"I've never been made angry by this airline," said Adrian Burns, 25, as he waited to check in for a flight to Columbus, Ohio.
Parent company FLYi Inc. tried in vain to find a major investor or buyer.So out of curiosity, I took a look at their books and lo and behold.
"There has not been a firm offer put forward that meets the financial criteria necessary to continue operations," Kerry Skeen, Independence Air's chairman and chief executive officer.
Looking at the numbers only, they paid over $14.7 million in interest and received only $5.2 million.
Their "total long-term debt and capital leases, less current portion" amount to over $231.2 million compared to approximately $167.1 million stockholder equity (pp. 38-39, 2004 annual report), with operating lease commitments extending past 2009 of over $2 billion! (p. 48, same report) Holy crap!!!
It doesn't take a financial analyst to see that these numbers are unsustainable. It reminds me of something the former CEO of Citibank said in a PBS interview on the secret history of credit cards (a must read), at a time when usury laws were still in place. Citibank had a credit card division that was hemorrhaging money:
Interest rates went up to 20 percent. And if you are lending money at 12 percent and paying 20 percent, you don't have to be Einstein to realize you're out of business.Left unexplained is, who was collecting 20% interest from Citibank? But, that's another story for another time.
For now, the lesson is simple: he who controls the money supply decides who FLIES and who DIES.