SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
February 18, 2005
FLYi, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-21976 13-3621051
State or Other Commission File IRS Employer
Jurisdiction of Number Identification No.
Incorporation
45200 Business Court, Dulles, VA 20166
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(703)650-6000
N/A
(Former Name or Former Address, if Changed Since Last
Report)
Item 7.01 Regulation FD Disclosure
On February 22, 2005, FLYi, Inc. (NASDAQ/NM: FLYI), parent
of low-fare airline Independence Air, issued a press release
stating that on February 18, 2005 it successfully completed
a consensual restructuring of its financial obligations.
The restructuring includes agreements with a majority of the
company's aircraft creditors. A copy of the press release
containing the announcement is included as Exhibit 99.1 to
this current Report and is incorporated herein by reference.
This Form 8-K is filed to provide additional details with
respect to the restructuring of the Company's obligations
with respect to various aircraft lenders and lessors. The
Company will file an additional Form 8-K within four
business days to provide information under Items 1.01, 2.03
and 3.02 with respect to the restructuring.
CRJ Aircraft:
The Company has restructured its payment obligations on 50-
seat Canadair Regional jets (CRJ) used in the Company's
Independence Air operations through a combination of payment
deferrals and lease terminations.
Lease Terminations - For 24 CRJ aircraft that are financed
through leveraged leases, the Company has amended the
operative lease agreements to provide that the leases will
be terminated and the aircraft returned to the applicable
lessors. Almost all of these aircraft will be returned
during the first and second quarters of 2005 and the
remainder in July 2005. These 24 aircraft to be terminated
include the 10 early lease terminations previously announced
by the Company in a Form 8-K filed on January 11, 2005. For
these 24 aircraft, lease payment obligations due between
January 1, 2005 and the termination of the leases have been
reduced. These lease terminations will reduce the Company's
payments during the period from January 2005 through
February 2007 by $81 million. The Company will be required
to meet certain return conditions and to deliver the
aircraft by agreed dates, but upon satisfaction of these
obligations will have no further rent obligations with
respect to these aircraft. The Company has also agreed with
GE Commercial Aviation Services, Inc. and certain of its
affiliates ("GECAS") on certain financial milestones to be
measured for various periods from the second quarter of 2005
through the first quarter of 2006. If these milestones are
not met, GECAS would have the right to terminate leases for
up to 8 additional CRJs.
Lease Deferrals - For a total of 52 CRJ aircraft that are
financed through leveraged leases or through mortgage loan
financing, the Company has amended the operative lease or
loan agreements to revise the rental structure from semi-
annual payments to monthly payments and to defer
approximately $70 million of the rent or loan payments that
would have been due. The result is a deferral of rent
between January 2005 and February 2007. The deferred lease
and loan payments will be repaid on a monthly basis
beginning in May 2006.
Other CRJs - As previously disclosed, the Company sold four
CRJs in December 2004. Proceeds from the sale were
approximately $50 million. In order to complete this
transaction, the Company applied approximately $30 million
of deposits with Bombardier to pay down an interim loan on
two of the aircraft in order to release liens prior to the
sale of these aircraft. Also as previously disclosed, one
CRJ was removed from the fleet and placed in the hands of
the lender in January 2005 after the lender in the leveraged
lease did not agree to participate in the restructuring and
filed a lawsuit in the Supreme Court of the State of New
York, County of New York to repossess the aircraft. Six CRJ
aircraft that continue to be used in the Company's
Independence Air operations and that were financed with
leveraged lease debt using an enhanced equipment trust
certificate (EETC) securitization were not subject to
negotiations or restructuring agreements between the Company
and its creditors.
J-41 Turboprop Aircraft
Prior to the restructuring, the Company retained 30 British
Aerospace J-41 turboprop aircraft that were previously
retired from the Company's operating fleet and are not
currently used in Independence Air operations. The Company
reached agreements with lessors and lenders of 21 of these
aircraft for the consensual early termination of the leases,
the return the aircraft to the lessors, and the elimination
of future rent obligations. These lease terminations will
reduce the Company's net payments during the period from
January 2005 through February 2007 by $13.5 million. The
Company will be responsible for certain return obligations
with respect to these aircraft, but upon satisfaction of
these obligations will have no further rent obligations with
respect to these aircraft. The Company will retain its
obligations for eight J-41s, seven of which are financed by
its EETC securitization and were not subject to negotiations
or restructuring agreements between the Company and its
creditors, and one of which is leased by a party that
declined to participate in the restructuring. One other J-
41 is owned by the Company and is being offered for sale.
The Company has committed to retire the remaining loan
obligations on that aircraft within an agreed period of
time.
$16 Million Term Loan
The Company also entered into definitive agreements with
GECAS, for a 5-year term loan in the amount of $16.1 million
secured by CRJ spare engines and parts. The principal
amount of this loan was advanced on February 18, 2005.
328Jet Aircraft
The Company had previously disclosed that it had the right
to assign 30 Fairchild Dornier 328 regional jet (328Jet)
aircraft formerly used in the Company's Delta Connection
operations to Delta Air Lines, Inc. ("Delta") and to require
Delta to assume the aircraft leases as a result of the
Company's Delta Connection agreement being terminated
without cause, but that the Company would be liable for
future obligations under the leases in the event that Delta
at any time did not fulfill those obligations. The Company
is currently in the process of delivering these aircraft to
Delta, but as part of its restructuring effort, it has also
secured commitments from lenders in the leveraged leases
controlling these aircraft to release the Company from
future obligations to them under the 328Jet leases upon
assignment of those aircraft to Delta. With these
agreements, the Company has completed an essential element
of its restructuring by eliminating a contingent liability
to lenders on these aircraft.
The Company remains responsible for the lease payments for
the 30 328Jets to be assigned to Delta until the assignment
to Delta is completed. Delta is reimbursing these payments
on a weekly basis prior to the assignment. The Company made
a partial payment consisting of interest only on the lease
payments that were due in January 2005 and has been
forwarding payments received from Delta to the applicable
lease parties as received, but has agreed to pay the balance
of the January lease payment, in the approximate amount of
$7.3 million, by February 28, 2005. It anticipates that it
will be fully reimbursed by Delta at the time of the
aircraft assignment. The Company obtained rent deferrals
similar to those reached on its CRJ fleet for the remaining
two leased 328Jets that are not being assigned to Delta, and
owns one other 328Jet aircraft that the Company is offering
for sale.
Equity and Other Consideration To Be Provided by the Company
In exchange for concessions from aircraft financing parties,
the Company agreed to issue approximately 8.3 million
additional shares of FLYi stock, representing approximately
18.3% increase in the number of the Company's common shares
outstanding. A portion of those shares will be issued
directly to creditors as equity and a portion will be in
issued under convertible non-interest bearing notes. These
notes will be convertible at the holder's option in the
future or by the Company at the expiration of the term of
the note. The Company also agreed to file a resale
registration statement covering the possible sale of these
shares. In addition, the Company has issued or will issue
approximately $6.1 million of unsecured notes and agreed to
provide certain other consideration associated with
termination of certain of its J-41 turboprop aircraft.
Interest Payments on Outstanding Convertible Notes
On February 15, 2005 the Company determined not to make the
interest payment on its 6% Convertible Notes due 2034,
exercising its rights to defer payment on those notes for a
30-day grace period. As a result of concluding its
restructuring efforts, on February 18, 2005 the Company paid
the trustee the interest owing under its 6% Convertible
Notes due 2034, and the note trustee has commenced the
process of paying this interest over to the noteholders.
This filing on Form 8-K contains forward-looking statements
and is made as of February 22, 2005, and the Company
undertakes no obligation to update its disclosures, whether
as a result of developments in its efforts, or as a result
of any other new information, future events, changed
expectations or otherwise, prior to its next required filing
with the Securities and Exchange Commission. Such forward-
looking statements are subject to risks, uncertainties,
assumptions and other factors that may cause the actual
results of the Company to be materially different from those
reflected in such forward-looking statements. Such risks
and uncertainties include, among others: the ability of the
Company to effectively implement its low-fare business
strategy utilizing regional jets and Airbus aircraft, and to
compete effectively as a low-fare carrier, including
passenger response to the Company's new service, and the
response of competitors with respect to service levels and
fares in markets served by the Company; the ability to
expand the Company's customer base through third party
distribution services; the ability to successfully and
timely complete the acquisition of its Airbus aircraft, and
to successfully integrate these aircraft into its fleet; the
effects of high fuel prices on the Company; the ongoing
deterioration in the industry's revenue environment; and
general economic and industry conditions; and other risk
factors that are more fully disclosed under "Management's
Discussion and Analysis of Financial Condition and Results
of Operations" in the Company's Form 10-K for the year ended
December 31, 2003, its Quarterly Report Form 10-Q for the
period ended September 30, 2004 and in subsequently filed
Forms 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has caused this current report to be
signed on its behalf by the undersigned hereunto duly
authorized.
FLYi, Inc.
Date: February 22, 2005 By: /S/ David W. Asai
David W. Asai
Vice President, Controller
and Chief Accounting Officer