================================================================= FLYI BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2005 (ISSN XXXX-XXXX) November 14, 2005 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- FLYI BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Rose Mae Ireen S. Mayol, Christopher G. Patalinghug, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of FLYI BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO FLYI BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF FLYI INC. [00002] FLYI INC.'S BALANCE SHEET AS OF JUNE 30, 2005 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] FLYI INC.'S CHAPTER 11 DATABASE [00005] LIST OF FLYI'S 40 LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION FOR JOINT ADMINSTRATION OF CASES [00007] DEBTORS' MOTION TO RENEW & OBTAIN LETTERS OF CREDIT [00008] BANKRUPTCY FILING CUES S&P TO LOWER FLYI'S RATING TO D [00009] INDEPENDENCE AIR REACHES TENTATIVE PACT WITH MECHANICS [00010] INDEPENDENCE AIR REACHES AGREEMENT WITH FLIGHT ATTENDANTS [00011] INDEPENDENCE AIR SCORES HIGH ON 2005 ZAGAT AIRLINE SURVEY [00012] CIT GROUP QUANTIFIES EXPOSURE TO INDEPENDENCE AIR [00013] FLYI RECEIVES NOTICE FROM NASDAQ REGARDING DELISTING [00014] FLYI'S FORM 10-Q REPORT ENDED SEPT. 30 WILL BE FILED LATE KEY DATE CALENDAR ----------------- 11/07/05 Voluntary Petition Date 11/27/05 Deadline to Provide Utilities With Adequate Assurance 12/07/05 Deadline to File Schedules of Assets & Liabilities 12/07/05 Deadline to File Statements of Financial Affairs 12/07/05 Deadline to File Lists of Leases and Contracts 02/05/06 Deadline to remove actions under FRBP 9027 03/07/06 Deadline to make decisions about lease depositions 03/07/06 Expiration of Exclusive Plan Proposal Period 05/06/06 Expiration of Exclusive Solicitation Period 11/07/07 Deadline to Commence Avoidance Actions Organizational Meeting to Form Creditors' Committees First Meeting of Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO FLYI BANKRUPTCY NEWS ----------------------------------------------------------------- FLYI BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' chapter 11 proceedings. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of FLYI BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving FLYI BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 572 Fernwood Lane Fairless Hills, PA 19030 Telephone (215) 945-7000 Fax (215) 945-7001 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. Currently, we provide similar coverage about the restructuring proceedings involving Delta Air Lines, Northwest Airlines, Mesaba Aviation, US Airways, UAL Corporation and United Airlines, VARIG, S.A., ATA Airlines, McLeodUSA Incorporated, Adelphia Communications and Adelphia Business Solutions, WorldCom, Winstar, Refco, Inc., Enron Corp., Mirant Corp., PG&E National Energy Group, Entergy New Orleans, Levitz Home Furnishings, O'Sullivan Industries, WestPoint Stevens, Winn- Dixie Store, Inc., Kmart Corp., Ames Department Stores, Spiegel, Inc. (and its Eddie Bauer and Newport News subsidiaries), Delphi Corporation, Collins & Aikman Corporation, Meridian Automotive Systems, Inc., Tower Automotive Inc., Federal-Mogul Corporation, Foamex International, ASARCO LLC, Solutia, W.R. Grace & Co., Owens Corning, Armstrong World Industries, USG Corporation, Anchor Glass Container Corp., Allied Holdings, Inc., Saint Vincent Catholic Medical Centers, Integrated Health Services, Mariner Post-Acute & Mariner Health, TECO Energy Inc.'s Panda Gila River and Union Power subsidiaries, ANC Rental, the Roman Catholic Church in the United States, Trump Hotels & Casino Resorts, Inc., Interstate Bakeries Corporation, Parmalat Finanziaria, S.p.A., Bethlehem Steel, Kaiser Aluminum, Exide Technologies, National Century Financial Enterprises, and Reliance Group Holdings & Reliance Financial. ================================================================= [ ] YES! Please enter my personal subscription to FLYI BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) FLYI BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' chapter 11 proceedings. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of FLYI BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF FLYI INC. ----------------------------------------------------------------- FLYi, Inc. 45200 Business Court Dulles, Virginia 20166 Tel: (703) 650-6000 http://www.flyi.com/ FLYi, Inc., through Independence Air, Inc., operates a premier low-fare airline providing all-jet service to 38 destinations in 23 states, with approximately 200 scheduled non-stop flights system-wide every weekday. Most flights depart from or arrive at Independence's hub at Washington Dulles International Airport, located in one of the fastest growing and highest per-capita income areas of the United States. According to Steven Westberg, FLYi Vice President - Restructuring, Independence provides significant benefits to travelers by offering a highly reliable operation with low, simple fares, jet aircraft with leather seats, a customer-focused attitude, and service to many smaller communities that previously had no low-fare alternatives. Prior Code Share Business Independence Air, Inc., was previously named and operated as Atlantic Coast Airlines. ACA operated as a regional airline under code share agreements with United Airlines, Inc., and Delta Air Lines, Inc. United and Delta terminated the code share agreements in 2004. Independence Air Operations In June 2004, FLYi commenced operations as "Independence Air". Independence transformed itself into a premier low-fare independent airline by quickly entering markets on the East Coast and bringing with it customer-focused service, high-quality operations and low, simple fares. Through its base in Washington, D.C., Independence today offers non-stop and connecting service to more than 470 city pairs, including most major cities along the East Coast. Customers enjoy low-fare, fast and easy travel to their destinations on Independence's all jet fleet, consisting of 12 132-seat Airbus A319 aircraft flying long-haul or high-demand routes and 30 50-seat Bombardier CRJ-200 regional jets flying shorter routes. Mr. Westberg relates that the Company has made significant progress in the creation of an independent airline, particularly in light of the current industry conditions. FLYi has launched an entirely new brand within a short period of time, as well as a new ticket distribution system, including an award-winning Web site through which approximately 77% of its sales are now made. FLYi has over 1,000,000 members in its frequent flyer program and has been ranked by various publications as having service that is one of the most reliable and best in the industry. While Independence Air believes it has been successful in stimulating demand to, from and through its Washington Dulles hub, Mr. Westberg says, it has not achieved the load factor and passenger fares projected in its original business model and thus has not met revenue projections. Factors contributing to lower revenues than originally projected include the addition of new competitive service in markets served by Independence Air and a lower level of business traffic relative to leisure traffic than had been anticipated. "This revenue shortfall combined with unprecedented high fuel prices has caused Independence Air to sustain higher losses and to expend more cash than it anticipated when it embarked on its strategy of becoming an independent airline," Mr. Westberg relates. To address this situation, Independence Air took a number of steps including schedule changes, service reductions, a financial restructuring, capital spending reductions and changes in its distribution strategy. Specifically, FLYi retained Miller Buckfire & Co., LLC, and ENA Advisors LLC to help identify and contact strategic and financial investors, and negotiate with its aircraft and other creditor constituencies. The Company also retained Sabre, Inc., to assist in modeling various potential operational configurations. FLYi is also in the process of discontinuing its West Coast operations. The Company ceased operations at certain other destinations. As of October 31, 2005, FLYi grounded 28 CRJs and is seeking to reject the leases for, or abandon, 22 of the CRJs. The Company also sold certain surplus assets to raise cash. However, Mr. Westberg says, these measures were not enough to stem FLYi's operating losses. As of September 30, 2005, on a consolidated basis, the Company had assets of $378,500,000 and liabilities of $455,400,000. For the first nine months of 2005, the Company had revenues of $326,400,000. As of November 7, 2005, FLYi had 3,283 employees, of whom 1,375 are union members. The Company's pilots are represented by the Airline Pilots Association, its flight attendants are represented by the Association of Flight Attendants-Communication Workers of America, and its maintenance personnel are represented by the Aircraft Mechanics Fraternal Association. Liquidity FLYi's principal operating assets consist of its fleet of A319 and CRJ aircraft, and the spare parts, equipment, inventory, and intangible assets used to run the airline. The Company's primary non-operating assets consist of: (i) unrestricted cash, (ii) restricted cash, and (iii) its claim against United Airlines pending before the United States Bankruptcy Court for the Northern District of Illinois. As of November 4, 2005, the Company had $24,000,000 in unrestricted and unencumbered cash, and $46,800,000 in restricted cash. The restricted cash consists primarily of: (i) approximately $20,200,000 in cash that secures the Company's reimbursement obligations to Wachovia Bank, N.A., pursuant to various letters of credit issued by Wachovia for the account of the Company; and (ii) approximately $26,600,000 in cash held by the Company's Visa/Mastercard credit card processors for flights booked and charged by Independence's customers but not yet flown. FLYi filed a claim against United Airlines in United's Chapter 11 case for damages arising from the rejection by United of its United Express agreement with FLYi. FLYi has asserted that United owes it approximately $1,070,000,000 for damages. The Illinois Bankruptcy Court conducted an evidentiary hearing on that claim in September 2005. Post-hearing briefs have been submitted and the Court is expected to rule on the claim this month. Plans & Strategies FLYi sought bankruptcy protection to conserve its cash and use the chapter 11 process to continue its efforts to find an investor or strategic partner to fund its business operations, or a purchaser of all or some of the Company's operations or assets. While in Chapter 11, FLYi intends to operate under its "30-12 Plan," which contemplates the continued operations of 30 CRJs and 12 A319s. The Company developed the 30-12 Plan with the assistance of its advisors. "[We] believe that this flight plan represents [the Company's] optimal configuration utilizing both its fleet of CRJs and A319s," Mr. Westberg says. FLYi will continue to actively seek investors, strategic partners or purchasers during the Chapter 11 cases. Based on its current cash position and projections, the Company has determined that the investment or auction process must be brought to conclusion, in the near term, in its chapter 11 cases. Mr. Westberg notes that promptly locating an investor or purchaser may enable the Company to more quickly undertake operational, contractual, or other changes that that investor or purchaser may require as a condition to investment or purchase. "Furthermore, the Company believes that the costs of remaining in chapter 11 will be sufficiently high that it will be in the best interests of its stakeholders efficiently to conclude the investment [or] auction process," Mr. Westberg says. FLYi intends to complete this process on or before January 5, 2006. "While the Company's preference is to obtain an investment sufficient to enable it to reach cash flow break-even, the Company recognizes that in this challenging industry environment, an investor (whether financial or strategic) or buyer may not step forward. The Company also recognizes that an investor may seek to acquire the business pursuant to a sale rather than a plan transaction," Mr. Westberg adds. ----------------------------------------------------------------- [00002] FLYI INC.'S BALANCE SHEET AS OF JUNE 30, 2005 ----------------------------------------------------------------- FLYi, Inc. Condensed Consolidated Balance Sheet At June 30, 2005 Assets Current: Cash and cash equivalents $19,443,000 Short term investments 46,515,000 Restricted cash 49,722,000 Accounts receivable, net 16,418,000 Expendable parts and fuel inventory, net 13,938,000 Prepaid expenses and other current assets 44,901,000 Assets held for sale 12,311,000 ------------- Total current assets $203,248,000 ------------- Restricted cash $19,756,000 Property & equipment, net 179,227,000 Intangible assets 171,000 Debt issuance costs, net 4,840,000 Aircraft deposits 73,812,000 Other assets 6,226,000 ------------- Total assets $487,280,000 ============= Liabilities and Stockholders' Equity (Deficit) Current: Current portion of long-term debt $17,578,000 Current portion of capital lease obligations 914,000 Accounts payable 8,735,000 Air traffic liability 54,287,000 Accrued liabilities 74,530,000 Accrued aircraft early retirement charge 11,719,000 ------------- Total current liabilities $167,763,000 ------------- Long-term debt, less current portion $253,777,000 Capital lease obligations 1,420,000 Deferred credits, net 68,200,000 Accrued aircraft early retirement charge 22,232,000 Other long-term liabilities 3,271,000 ------------- Total liabilities $516,663,000 ------------- Stockholders' equity (deficit): Common stock $1,081,000 Additional paid-in capital 158,104,000 Less: Common stock in treasury (35,718,000) Accumulated other comprehensive income (85,000) Retained earnings (deficit) (152,765,000) ------------- Total stockholders' equity (deficit) ($29,383,000) ------------- Total liabilities & stockholders' equity (deficit) $487,280,000 ============= ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- * Independence Air To Continue Flying And Serving Customers * Auction Process Announced For Potential Investors or Purchasers DULLES, Virginia -- November 7, 2005 -- FLYi, Inc., parent of low-fare airline Independence Air, today announced that FLYi, Inc. and its subsidiaries (the "company") including Independence Air, have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in order to restructure the company's aircraft leases and other obligations to achieve necessary cost savings. The company also announced it will request court approval to engage in a formal court-supervised auction process to seek outside investor(s) or purchaser(s) it needs to continue its operations. If the process is successful, it is expected to be concluded within the next sixty days. Those who have expressed interest during previous discussions, as well as new parties, will be invited to present their bids. Bidders will be permitted to demonstrate their interest in investing in the company, or to bid on all or portions of the company's assets. The company currently anticipates that it has the financial resources to fund its obligations-including the payment of employee wages and benefits-during the process. As it undertakes the auction process, Independence Air plans to continue serving customers, and to continue its flight schedules in the ordinary course of business. The company plans to honor reservations and tickets on Independence Air and to allow its 1,000,000+ iCLUBSM members to continue to accrue and redeem points on the airline with no restrictions. The company has no plans to make any additional changes to its operating schedule or route map of destinations at this time. Independence Air now offers approximately 220 daily departures to 36 destinations. "After careful consideration, we have concluded that a court-supervised restructuring will allow us to complete our cost-savings initiatives while seeking outside investors or purchasers, and represents the best solution for Independence Air, our customers, employees, creditors and the communities we serve," said Kerry Skeen, Chairman and CEO of FLYi, Inc. He added, "Since the launch of Independence Air almost 18 months ago, our employees have helped us achieve a remarkable degree of customer service success and brand recognition while operating in what has been described as the most challenging economic environment in airline industry history, including record high fuel prices and extreme revenue weakness. These circumstances have prevented us-and virtually all U.S. airlines- from meeting financial goals. We have already reduced operating costs by undertaking a comprehensive operational restructuring. We will continue that effort and move quickly to use the tools of the Chapter 11 process to implement other changes that will allow us to achieve an even more competitive cost structure to make us more attractive to potential investors or purchasers." As part of this cost-cutting effort, the company has announced it is undertaking a process aimed at company-wide wage reductions. Taking a leadership role, CEO Kerry Skeen has agreed to an immediate 25% salary reduction on top of a 15% cut earlier this year. President and Chief Operating Officer Tom Moore will take a 20% cut, on top of an earlier 10% reduction. Management and other salaried employees will be subject to an immediate 5% pay reduction. The company has been engaging the leaders of its unionized work groups-pilots, flight attendants and mechanics-in an effort to enact changes to wage rates and work rules. It is anticipated that an announcement on a tentative agreement with both the flight attendants (AFA) and mechanics (AMFA) will be released shortly. Mr. Skeen concluded, "We want to once again offer our sincere thanks to the seven million passengers who have flown with us so far. Since we launched last summer, we have built a brand that truly stands for something-a very different style of service-and our customers have been more than generous in their praise of our people. As we work behind the scenes to address the company's financial situation, we thank you for your continued support of Independence Air at Washington Dulles and in all the communities we serve. " In conjunction with today's filing, Independence Air filed a variety of "first day motions" to help ensure a smooth transition into the Chapter 11 reorganization case. During the auction process, vendors, suppliers and other business partners will be paid under normal terms for goods and services provided during the reorganization. The company filed its petitions in the U.S. Bankruptcy Court for the District of Delaware. The company's petitions listed assets of approximately $378.5 million and liabilities of approximately $455.4 million as of September 30, 2005. Unrestricted cash as of the day of filing is $24.0 million. Miller Buckfire and Co., LLC and ENA Advisors have been retained as the company's financial advisors and Jones Day has been retained as restructuring counsel. Gibson Dunn & Crutcher LLP serves as the company's corporate counsel. All FLYi, Inc. shareholders are advised that the likely outcome of the company's Chapter 11 case is the cancellation of the company's existing common stock without consideration, in which case FLYi stock would have no value. FLYi stock is highly speculative and the company urges investors to use extreme caution in decisions about the stock. Independence Air began low-fare service from its hub at Washington Dulles International Airport on June 16, 2004, and has served over seven million passengers to date. The company first began commercial air service on December 15, 1989, and operated previously as Atlantic Coast Airlines. Independence Air is the low-fare airline that makes travel fast and easy for its customers with a customer first attitude, innovative thinking and a willingness to challenge the status quo. ----------------------------------------------------------------- [00004] FLYI INC.'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: FLYi, Inc. aka Atlantic Coast Airlines Holdings, Inc. 45200 Business Court Dulles, Virginia 20166 Bankruptcy Case No.: 05-20011 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Independence Air, Inc. 05-20012 Atlantic Coast Jet, LLC 05-20013 Atlantic Coast Academy, Inc. 05-20014 IA Sub, Inc. 05-20015 WaKeeney, Inc. 05-20016 Atlantic Coast Airlines, Inc. 05-20017 Chapter 11 Petition Date: November 7, 2005 Court: District of Delaware Judge: Mary F. Walrath Debtors' Counsel: Paul D. Leake, Esq. Brad B. Erens, Esq. Scott J. Friedman, Esq. Jones Day 222 E. 41st Street New York, NY 10017-6702 Tel: (212) 326-3939 Fax: (212) 755-7306 http://www.jonesday.com/ Debtors' Local Counsel: Brendan Linehan Shannon, Esq. M. Blake Cleary, Esq. Matthew Barry Lunn, Esq. Ian S. Fredericks, Esq. Young, Conaway, Stargatt & Taylor The Brandywine Building 1000 West Street, 17th Floor P.O. Box 391 Wilmington, Delaware 19899-0391 Tel: (302) 571-6600 Fax: (302) 571-1253 http://www.ycst.com/ Financial Condition as of September 30, 2005: Total Assets: $378,500,000 Total Debts: $455,400,000 ----------------------------------------------------------------- [00005] LIST OF FLYI'S 40 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature of Claim Claim Amount ------ --------------- ------------ U.S. Bank National Association Convertible Notes $125,000,000 Goodwin Square As Trustee 225 Asylum Street Hartford, CT 06103 Export Development Canada Aircraft Loans $56,443,254 151 O'Connor Ottawa, ON K1A1K3 Canada HSH Nordbank AG Aircraft Loans $19,507,071 Martensdamm 6 Kiel 24103 Germany Canadian Regional Aircraft Loan $18,814,257 Aircraft Finance Transaction No. 1 Limited 22 Greenville Street Saint Helier, Jersey JE48PX Channel Islands Trident Turboprop (Dublin) Ltd. Convertible Notes $16,141,438 North Wall Quay Interest Bearing Dublin 1, Dublin Notes/ Lease Ireland Settlement Claims 1997-1 Pass Through Trusts Aircraft Loans $7,134,833 Manufactures & Traders Co. 25 S. Charles Street, 16th Floor Baltimore, MD 21210 BAE Systems Regional Convertible Notes $5,000,000 Aircraft Inc. Acting on its behalf & on behalf Of its affiliate BAE Systems (Operations) Limited 13850 McLearen Road Herndon, VA 20171 FINOVA Capital Corp. Convertible Notes $4,459,208 4800 North Scottsdale Road M/S 4W75 Scottsdale, AZ 85251 AVSA S.A.R.L. Interest Bearing $3,750,000 2 Rond-Point Maurice Bellonte Notes Blagnac, 31700 France BAE Systems Regional Interest Bearing $3,500,000 Aircraft Inc. Notes Acting on its behalf & on behalf Of its affiliate BAE Systems (Operations) Limited 13850 McLearen Road Herndon, VA 20171 Wachovia Bank NA Aircraft Rent $2,414,913 401 South Tryon Street Obligations 12th Floor, NC1179 Charlotte, NC 28288-5272 ING Lease (Ireland) B.V. Aircraft Rent $1,134,787 1325 Avenue of the Americas New York, NY 10019 Erste Bank der Oesterreichischen Bank Loan $652,891 Sparkassen AG, London Branch 68 Comhill London EC3V 3QE United Kingdom SEQUA CORP. Maintenance $621,091 4430 Direct Drive Contract P.O. Box 200150 San Antonio, TX 78219 Stacy M. Platone Litigation Claim $370,000 20415 Riverbend Square Apartment 203 Sterling, VA 20165 Aircraft Protective Systems Trade Payable $159,947 APS, Inc. U.S. Bank National Association Trustee Fees $150,494 America OnLine Inc. Trade Payable $140,238 Wachovia Bank NA Trustee Fees $125,200 Pan Am Trade Payable $123,213 Hillsborough County Aviation Trade Payable $116,857 U.S. Bank National Association Aircraft Rent $100,319 Obligations Greensville-Spartanburg Airport Related $100,162 Charges Treasurer of Allen County Property Taxes $90,003 Travelocity.com LLP Trade Payable $89,111 Avcraft Aerospace GMBH Trade Payable $82,000 Rockwell Collins Inc. Trade Payable $80,583 Citta, Inc. Trade Payable $80,167 RDA Corporation Trade Payable $79,228 Marion County Treasurer Property Taxes $73,819 Tangible Impact, Inc. Trade Payable $73,097 Tysons Corner Holding, LLC Trade Payable $69,996 Allied Signal Aerospace Trade Payable $68,881 Saint Joseph County Treasurer Property Taxes $65,928 Reebaire Services Inc. Trade Payable $60,381 New Media Strategies Inc. Trade Payable $53,332 Cisco Systems Capital Corp. Trade Payable $52,714 TravelZoo USA, Inc. Trade Payable $51,259 Avex Flight Support Inc. Trade Payable $48,305 FAA Government Unknown Obligations ----------------------------------------------------------------- [00006] DEBTORS' MOTION FOR JOINT ADMINSTRATION OF CASES ----------------------------------------------------------------- FLYi, Inc., and its six debtor-subsidiaries are "affiliates," as that term is defined in Section 101(2) of the Bankruptcy Code. Rule 1015(b) of the Federal Rules of Bankruptcy Procedure provides, in relevant part, that if a joint petition or if two or more petitions are pending in the same court by or against a debtor and an affiliate, the court may order a joint administration of the estates. Brendan Linehan Shannon, Esq., at Young, Conaway, Stargatt & Taylor, LLP, in Wilmington, Delaware, points out that joint administration will permit the Clerk of the Court to utilize a single general docket for the Debtors' cases and combine notices to creditors of the Debtors' estates and other parties-in- interest. Joint administration will avoid the need for duplicative notices, motions and applications, thereby saving time and expense. Joint administration will also enable parties- in-interest to be apprised of the various matters before the Court in all of the Debtors' cases. Furthermore, Mr. Shannon continues, because the Debtors' cases involve thousands of potential creditors, joint administration will: (a) significantly reduce the volume of pleadings that otherwise would be filed with the Clerk of the Court; (b) render the completion of various administrative tasks less costly; (c) minimize the number of unnecessary delays associated with the administration of numerous separate Chapter 11 cases; and (d) protect the creditors of each of the Debtors' estates against potential conflicts of interest. Mr. Shannon clarifies that the Debtors are not seeking the substantive consolidation of their estates. The rights of the parties-in-interest will not be prejudiced by the joint administration of the Debtors' cases for procedural purposes only. Accordingly, the Court orders that the Debtors' chapter 11 cases will be consolidated for procedural purposes only and will be administered jointly under Case No. 05-20011 Judge Walrath rules that all pleadings and papers filed in the Debtors' cases will be captioned: IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ---------------------------------x : In re: : Chapter 11 : FLYi, Inc., et al., : Case No. 05-20011 (MFW) : Debtors. : (Jointly Administered) : ---------------------------------x ----------------------------------------------------------------- [00007] DEBTORS' MOTION TO RENEW & OBTAIN LETTERS OF CREDIT ----------------------------------------------------------------- The Debtors are required to provide to third parties letters of credit in the ordinary course of business to secure the Debtors' payment or performance of certain obligations, including, without limitation: (a) workers' compensation obligations, (b) obligations owed to fuel suppliers and fuel consortia, and (c) obligations owed to the airport authorities. According to Brendan Linehan Shannon, Esq., at Young, Conaway, Stargatt & Taylor, LLP, in Wilmington, Delaware, failure to provide and timely renew these Letters of Credit could jeopardize the Debtors' ability to conduct their operations. "Absent the provision of the Letters of Credit, these third parties may cease doing business with the Debtors." As of the Petition Date, all of the Debtors' Letters of Credit had been issued by Wachovia Bank, National Association, and the face amount of those Letters of Credit was approximately $19,800,000. Each Wachovia Letter of Credit is collateralized by cash deposited with Wachovia equal to 103% of the face amount of the Letter of Credit. In order to continue to operate their business in the ordinary course of business, the Debtors seek the Court's authority to continue to obtain Letters of Credit from Wachovia or any other party, including the renewal or replacement of existing Letters of Credit, as long as the amount of cash collateral pledged to the provider of a Letter of Credit does not exceed 103% of the face amount of the Letter of Credit. Mr. Shannon notes that based on the Debtors' current financial status, it is unlikely that they will be able to obtain Letters of Credit on an unsecured basis. The Debtors further seek the Court's permission to take all actions and pay all fees and costs associated with those Letters of Credit pursuant to the documents governing the Letters of Credit. "Since Wachovia holds cash collateral equal to 103% of the face amount of each Letter of Credit, Wachovia is an oversecured creditor with respect to any reimbursement obligation owed by the Debtors resulting from the proper draw of the Wachovia Letters of Credit and any fees and costs owed pursuant thereto," Mr. Shannon says. As a result, the Debtors also seek the Court's authority for them to permit Wachovia to setoff against the cash collateral pledged to it to secure Letter of Credit reimbursement obligations, fees and costs against the amounts owed to Wachovia with respect to those Letter of Credit reimbursement obligations, fees and costs. The setoff, Mr. Shannon explains, would not be self-effectuating by Wachovia. Instead, Mr. Shannon says, Wachovia will be permitted to conduct setoff only to the extent agreed to in writing by the Debtors. Wachovia may seek relief from the automatic stay to setoff cash collateral to the extent not agreed to by the Debtors. The Debtors further ask Judge Walrath for permission to pay all letter of credit fees and costs owed pursuant to the Wachovia prepetition Letters of Credit in the ordinary course. If those fees and costs were not paid, Wachovia would be entitled to seek from the Court authority to offset the cash collateral it holds to pay those fees and costs, and could cancel the Letters of Credit. "This might result in costs to the estate because the Debtors would have to expend additional resources and incur expenses to find replacement Letters of Credit and, in any event, Wachovia might seek reimbursement of its costs from the cash collateral, including the costs of seeking Court approval to setoff," Mr. Shannon says. * * * Judge Walrath grants the Debtors' request on an interim basis. ----------------------------------------------------------------- [00008] BANKRUPTCY FILING CUES S&P TO LOWER FLYI'S RATING TO D ----------------------------------------------------------------- NEW YORK, New York -- November 7, 2005 -- Standard & Poor's Ratings Services today lowered its ratings on FLYi Inc., including lowering the corporate credit rating to 'D' from 'CC.' Ratings on pass-through certificates were also lowered and remain on CreditWatch with negative implications. "The rating actions follow the company's filing for Chapter 11 bankruptcy protection today," said Standard & Poor's credit analyst Betsy Snyder. "Over the next 60 days, the company will seek outside investors in order to continue its operations," she continued. Dulles, Va.-based FLYi is the parent of Independence Air, a small airline based at Washington Dulles International Airport. Since its conversion to a low-cost airline in mid-2004, the company's losses have been substantial after several profitable years when it served as a feeder partner to United Air Lines Inc. and Delta Air Lines Inc. In the first half of 2005, the company lost $202 million after a $192 million loss in 2004. Its previously healthy unrestricted cash position had eroded to only $24 million at the time of its bankruptcy filing. Absent new investment to support a reorganization, the company will likely be liquidated. In its bankruptcy filing, the company has indicated it will reject all eight J41 aircraft financed through pass-through trust series 1997-1A-C. The other six aircraft included in this pass- through trust series are CRJ-200 models. Series A noteholders will likely receive substantial, but less than full, recovery on their investment. However, it is very unlikely that series B and C noteholders will receive anything. Recent developments in the 50-seat regional jet aircraft market have resulted in an oversupply of this size of aircraft, which has led to the announced cessation of production in 2006 by Bombardier. In addition, recovery will also be reduced by interest payments expected to be made to noteholders from the dedicated liquidity facility and costs associated with repossession of the aircraft. ----------------------------------------------------------------- [00009] INDEPENDENCE AIR REACHES TENTATIVE PACT WITH MECHANICS ----------------------------------------------------------------- DULLES, Virginia -- November 8, 2005 -- FLYi, Inc., parent of low-fare airline Independence Air today announced it has reached a tentative agreement with the Aircraft Mechanics Fraternal Association (AMFA) that would enact new wage rates and work rules for Independence Air mechanics. The company and AMFA have been negotiating, under supervision of the National Mediation Board, since June 2002. The agreement is subject to membership ratification, as part of a process that will begin shortly. Tom Moore, President and Chief Operating Officer of FLYi, Inc. "This is an important step for our company, and we are pleased that we could reach an agreement with our mechanics group as part of our overall restructuring effort. The professionalism of our mechanics has always been a major element in the operational success of Independence Air, and we are thankful for their continued support during this critical time." AMFA Airline Representative Marc Gendron states, "The Association is pleased that a tentative agreement has been achieved. We feel the agreement, pending ratification of the membership, satisfies the company's short-term needs and also addresses the long-term needs of our membership." Independence Air offers low fares every day to destinations across America with comfortable leather seats and Tender Loving Service. Independence Air is the low-fare airline that makes travel fast and easy for its customers with a customer first attitude, innovative thinking and a willingness to challenge the status quo. ----------------------------------------------------------------- [00010] INDEPENDENCE AIR REACHES AGREEMENT WITH FLIGHT ATTENDANTS ----------------------------------------------------------------- DULLES, Virginia -- November 8, 2005 -- FLYi, Inc., parent of low-fare airline Independence Air and the Association of Flight Attendants-Communication Workers of America (AFA-CWA) have agreed to changes in pay rates and work rules for Independence Air flight attendants, subject to membership ratification. The agreement has been designed to assist the company as part of its ongoing restructuring process by making certain modifications to the existing Flight Attendant Collective Bargaining Agreement. The ratification process will begin shortly. Independence Air President and Chief Operating Officer Tom Moore said, "This is an important step for us, and we applaud our flight attendants and their leadership for stepping up in their efforts to help at a time when that help is needed most. Our flight attendants have been critical to the customer success we've achieved so far, and they continue to do an excellent job in their role as service leaders for our airline." AFA-CWA Master Executive Council President Kenneth Kindred said, "The Independence Air flight attendants are working with management and other unions on the property to move us a step closer to a successful conclusion to the company's restructuring efforts. We are proud of the company's history and our role in making Independence Air a national leader in customer satisfaction." Independence Air offers low fares every day to destinations across America with comfortable leather seats and Tender Loving Service. Independence Air is the low-fare airline that makes travel fast and easy for its customers with a customer first attitude, innovative thinking and a willingness to challenge the status quo. ----------------------------------------------------------------- [00011] INDEPENDENCE AIR SCORES HIGH ON 2005 ZAGAT AIRLINE SURVEY ----------------------------------------------------------------- DULLES, Virginia -- November 8, 2005 -- Low-fare airline Independence Air was named one of the best U.S. airlines in the 2005 consumer poll released yesterday by Zagat Survey. In the categories of "Top Service/Economy," "Top Website/Economy," "Top Comfort/Economy," and "Top Overall/Economy" the company finished in the top five. A total of 22 U.S.-based carriers were included in the survey. Zagat Survey is the world's leading provider of consumer survey-based dining, travel and leisure information, with more than 250,000 voters participating worldwide. Survey respondents specifically recognized Independence Air as, ".a welcome alternative to the big boys" and staffed by "enthusiastic" employees who "actually seem to care." The complete Zagat U.S. Airline Survey can be found at http://www.zagat.com/ Independence Air Chairman and CEO Kerry Skeen said, "This recognition is a particular accomplishment when you consider that we don't have all the costly bells and whistles that some competitors offer, like seat-back TVs and meal service. What we do offer obviously leaves a lasting impression with customers- it's a real appreciation for what we call Tender Loving ServiceSM" He added, "In light of the financial challenges we and the rest of the airline industry are facing, this survey and the other strong rankings we've recently received validate that we are indeed on the right track with the product we are delivering. It is profoundly satisfying to get letters and emails from customers every day telling us that we have restored their faith in airline customer service." These results come on the heels of several other top airline industry accolades. Independence Air was ranked #2 in customer satisfaction in the highly regarded Market Metrix Survey (www.marketmetrix.com) and ranked in the Top 3 among U.S. airlines in Travel + Leisure's World's Best Awards. The company was also one of only two airlines to win an Extra Mile Award from Arthur Frommer's Budget Travel Magazine and made the Reader's Choice Top-10 list of U.S. airlines in Conde Nast Traveler. Independence Air is the low-fare airline that makes travel fast and easy for its customers with a customer first attitude, innovative thinking and a willingness to challenge the status quo. ----------------------------------------------------------------- [00012] CIT GROUP QUANTIFIES EXPOSURE TO INDEPENDENCE AIR ----------------------------------------------------------------- NEW YORK, New York -- November 7 -- CIT Group, Inc. (NYSE: CIT), a leading provider of commercial and consumer finance solutions, disclosed its current financing relationship with Independence Air, Inc. Today, Independence Air, with its corporate parent, Flyi, Inc., announced that the airline, Flyi and certain of their respective affiliates had filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Under existing lease agreements, Independence Air has operating leases on four recent vintage, CIT-owned aircraft. CIT's total exposure is approximately $135 million. Management believes, based on its current assessment of lease equipment carrying values and Independence Air's credit exposure that the Independence Air filing will not have a material adverse impact on our financial results. About CIT CIT Group Inc. (NYSE: CIT), a leading commercial and consumer finance company, provides clients with financing and leasing products and advisory services. Founded in 1908, CIT has nearly $60 billion in assets under management and possesses the financial resources, industry expertise and product knowledge to serve the needs of clients across approximately 30 industries. CIT, a Fortune 500 company and a component of the S&P 500 Index, holds leading positions in vendor financing, factoring, equipment and transportation financing, Small Business Administration loans, and asset-based lending. With its Global Headquarters in New York City and Corporate Offices in Livingston, New Jersey, CIT has approximately 6,000 employees in locations throughout North America, Europe, Latin and South America, and the Pacific Rim. For more information, visit http://www.cit.com/ ----------------------------------------------------------------- [00013] FLYI RECEIVES NOTICE FROM NASDAQ REGARDING DELISTING ----------------------------------------------------------------- DULLES, Virginia -- November 10, 2005 -- On November 7, 2005, FLYi, Inc. (the "Company") (Nasdaq: FLYIQ) received a letter from The NASDAQ Stock Market, Inc. ("NASDAQ") notifying the Company that, in light of the Company's announcement that it has filed for protection under Chapter 11 of the U.S. Bankruptcy Code (the "Filing") and in accordance with NASDAQ Marketplace Rules 4300, 4450(f) and IM-4300, the NASDAQ Staff has determined that the Company's common stock will be delisted from The NASDAQ Stock Market at the opening of business on November 16, 2005. The Company does not intend to appeal the NASDAQ Staff determination to delist the Company's common stock from the NASDAQ Stock Market. In addition, the letter from NASDAQ stated that, as a result of the Filing, as of the opening of business on Nov. 9, 2005, the fifth character "Q" will be appended to the Company's trading symbol. The letter from NASDAQ further stated that if the Company does not appeal the Staff's determination to delist the Company's common stock from The NASDAQ Stock Market, the Company's common stock will not be immediately eligible to trade on the OTC Bulletin Board or in the "pink sheets," and that the common stock may become eligible to so trade if a market maker makes application to register in and quote the security in accordance with Rule 15c2-11 under the Securities Exchange Act of 1934. Only a market maker, and not the Company, may make the application under Rule 15c2-11. The Company has advised the public, and reiterates, that the likely outcome of the company's Chapter 11 case is the cancellation of the company's existing common stock without consideration, in which case FLYi stock would have no value. Independence Air is the low-fare airline that makes travel fast and easy for its customers with a customer first attitude, innovative thinking and a willingness to challenge the status quo. ----------------------------------------------------------------- [00014] FLYI'S FORM 10-Q REPORT ENDED SEPT. 30 WILL BE FILED LATE ----------------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission, David W. Asai, FLYi Inc. senior vice president and chief financial officer, discloses that due to the additional demands that the Company's bankruptcy filing has placed on the time and attention of the Company's senior management, the Company does not have adequate personnel or other resources to complete all work necessary to file the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005 by the prescribed due date without unreasonable effort or expense. The company expects to file its Form 10-Q very soon. According to Mr. Asai, the Company expects to report a quarterly net loss of $47,700,000 for the third quarter of 2005 compared to net loss for the third quarter of 2004 of $82,700,000. The Company advised its stockholders that the likely outcome of the company's Chapter 11 case is the cancellation of the company's existing common stock without consideration, in which case FLYi stock would have no value. Selected Balance Sheet Data (Unaudited) As of September 30, 2005 (Preliminary) Cash, cash equivalents and short term investments $45,261,000 Restricted cash 56,674,000 Total Assets 378,497,000 ------------- Working Capital $21,754,000 ============= Selected Income Statement Data (Unaudited) Three Months Ended September 30, 2005 (Preliminary) Total Revenue $118,000,000 Total Operating Expense 163,063,000 ------------- Net Loss ($47,735,000) ============= Selected Income Statement Data (Unaudited) Nine Months Ended September 30, 2005 (Preliminary) Total Revenue $326,370,000 Total Operating Expense 568,245,000 ------------- Net Loss ($249,971,000) ============= *** End of Issue No. 1 ***