National gets another credit extension

Wednesday, Aug. 29, 2001 | 10:41 a.m.

National Airlines and its creditors have negotiated another extension of credit that will enable the bankrupt Las Vegas air carrier to continue operating through October.

Attorneys for National told U.S. Bankruptcy Court Judge Linda Riegle on Tuesday that a critical letter of credit from casino operator Harrah's Entertainment Inc. has been extended, enabling the airline to use money from the purchase of National tickets with credit cards.

The extension of credit prompted National, which filed for Chapter 11 bankruptcy protection in December, to issue a statement Monday to assure travelers flying on the airline that things were "business as usual" at the company.

National's fleet of 16 Boeing 757 jets continues to fly about 250,000 passengers a month between Las Vegas and 10 destinations as the company operates as a debtor-in-possession.

National Chairman and Chief Executive Officer Mike Conway said the airline is continuing to negotiate with unidentified "aerospace-related entities" to invest in or buy the company.

The credit extension was the fourth by Harrah's since May. Attorneys for Harrah's said National would be required to pay $100,000 for the extension and the letter of credit would be reduced from $15.5 million to $14.75 million.

Harrah's, in the company's fourth quarter, wrote off $39.4 million it had invested in National. A spokesman said the company currently has a potential maximum liability of the amount of the letter of credit, $14.75 million, and National has stayed current in paying for the credit extensions.

Companies that lease planes and provide fuel to National also are making concessions to keep the airline flying. Creditors feel they're more likely to be paid as long as the company remains afloat.

Meanwhile, hearings are being scheduled in Bankruptcy Court on National's major maintenance contractor's bid to attach one of the airline's jets.

A hearing is scheduled in October on a motion by B.F. Goodrich Aerospace MRO Group Inc., a Cleveland-based company with maintenance operations in Washington state.

In Bankruptcy Court documents, Goodrich said National delivered the jet to its Everett, Wash., base in September 2000 and the maintenance was completed Oct. 16. Goodrich said it submitted invoices totalling $1 million for the work but wasn't paid.

Goodrich filed suit in June against National and Pegasus Aviation Inc., San Francisco, one of the companies that leases planes to National, to attach the jet. A request by Pegasus to have a jury trial on the issue was rejected earlier this month by U.S. District Court Judge Philip Pro and the case remains in bankruptcy court.

Goodrich has placed similar liens on other planes it maintaned and hearings are being coordinated with other lessors.

Separately, National faces a proposed $11,000 fine for a security breach at Los Angeles International Airport in April 2000.

The FAA notified National in July that it proposed the fine after an undercover FAA agent was able to board a National plane unchallenged while it was being cleaned.

The unbadged agent was able to board the plane by following closely behind employees that work for two companies contracted by National, DynAir Services and World Service.

National spokesman Dik Shimizu said World Service, which was contracted to clean the aircraft, would be responsible for paying the fine if it is assessed.