On Monday, the mayor of Lansing, Michigan, declared it was "Independence Day" to honor the start of flights to Lansing by a new airline called Independence Air. When airlines are losing millions, how can a new airline.and a low-fare one at that.hope to make any money? That's what we asked our Savvy Traveler, Rudy Maxa.

Independence Air isn't exactly a new airline--it's born from Atlantic Coast Airlines, which used to be United's regional carrier out of Washington, DC's Dulles Airport.

When Atlantic Coast and United couldn't resolve a contract dispute last April, Atlantic Coast decided to strike out on its own as a low-fare carrier with service along the East Coast, including big cities such as Chicago, Atlanta, New York and Boston. Fares range between $39 and $178 each way with no Saturday-night stay over requirement and no huge premium for last-minute purchases.

And following in the footsteps of Southwest--the airline with a great sense of humo--and JetBlue--with its real-time television and leather seats--Independence will try to be cool, too, with taped, in-flight announcements by Dennis Miller, Chuck Berry, James Carville and Mary Matalin.

So how can Independence make money? By cherry-picking its routes and flying smaller planes. But mostly by not having the enormous pension obligations and debt that plague major legacy carriers. And remember that, in most cases, newer airlines pay much lower salaries to employees.

Meanwhile, mid-sized communities such as Lansing; Rochester, New York; Dayton, Ohio; and Charleston, West Virginia, are delighted that a low-fare carrier is paying attention to them. Now, US Airways and United, two airlines that have dominated the East Coast for decades, have yet another headache. Already, Southwest's invasion of US Air's fortress in Philadelphia has forced US Airways to match Southwest's fares and liberal ticket-buying rules.

And it gets worse for the big boys: Independence Air is talking about buying a couple dozen big Airbus jets to fly to the West Coast and Florida from Washington's Dulles Airport.

Unless and until the legacy carriers adopt more flexible ticket rules and get their costs down, airlines such as Independence Air are going to eat them for lunch, market by market.

From St. Paul, I'm Rudy Maxa, the Savvy Traveler, for Marketplace.

June 16, 2004