EOS Airlines - Latest to shut down over high fuel prices and market issues

Eos Airlines Inc., a transatlantic, all-business-class airline, filed for bankruptcy protection over the weekend and said it will shut down Sunday, becoming the fourth U.S. carrier to go out of business this month.

Rising fuel prices, tight credit markets and the slowing economy are wreaking havoc on all U.S. carriers. But smaller, less well-funded companies are proving unable to withstand the challenges. Aloha AirGroup Inc., ATA Airlines Inc. and Skybus Airlines Inc. ceased operations earlier in April and Frontier Airlines Holdings Inc., filed for bankruptcy protection but continues to operate.

Closely held Eos, based in Purchase, N.Y., earlier this month said it expected to receive $50 million in new capital from a current investor, "financing needed to take us to corporate profitability in 2009," the company said at the time. But the company said Saturday it was unable to close on the financing, leaving it with insufficient cash to continue operating.

Eos said it planned to operate two flights Sunday from London's Stansted Airport to New York's John F. Kennedy International Airport and then shut down. It advised passengers to contact their credit card companies for refunds, and to contact other airlines directly to make alternate travel plans. Eos said other carriers are under no obligation to honor unused Eos tickets. The company filed its bankruptcy petition in U.S. Bankruptcy Court in New York, listing $70 million of assets and debt of $35 million.

Launched in 2005 with funding from West Coast venture capital firms, Eos, named for the Greek goddess of dawn, was an immediate hit with its upscale clients. The carrier operated a handful of Boeing 757 planes outfitted with just 48 seats that converted to lie-flat beds. Its service was luxurious but affordable. Prices, while in the range of $2,700 to $3,400 roundtrip, were much lower than business class on larger competitors.

The company's business model attracted imitators, including Silverjet PLC, flying between Newark and Luton, another London airport, and L'Avion, offering flights between Newark and Orly Airport in Paris. But a third competitor, MAXjet Airways Inc., based in Dulles, Va., and traded in London, shut down last Christmas Eve after failing to raise new capital.

The transatlantic market is highly competitive, and larger airlines, defending what they call their turf, added flights to some of London's alternate airports. British Airways PLC and Virgin Atlantic Airways both announced plans to start all-business class flights of their own.

When it announced its agreement on additional funding April 19, Eos said it was operating 44 transatlantic flights a week and planned additional routes between Newark, N.J., and Stansted, and between Stansted and Dubai. The financing was meant to close next Friday.

Jack Williams, chief executive officer of Eos, said Saturday that "after overcoming today's extremely challenging economic and credit environment to negotiate terms for a round of financing, it is regrettable that we were forced to take this action." But "some issues arose that we could not overcome," he said, and the financing fell through.