Details due on National’s future

Wednesday, July 25, 2001 | 11:11 a.m.

Las Vegas-based National Airlines' Internet site offers some bargain travel prices and an air of confidence: $30 seats to Los Angeles, $56 to San Francisco and $109 to the East Coast -- good for travel between Aug. 13 and Dec. 8.

But Thursday may be a more important date for Las Vegas-based National, which has been operating since December under Chapter 11 bankruptcy protection.

What happens at the Thursday hearing could determine whether National will have the ability to offer any deals next week and next month, let alone next December.

In late June National was hours away from shutting down its fleet of 16 Boeing 757 jets when it went into a U.S. Bankruptcy Court hearing and emerged with a deal involving one of its aircraft lessors, International Lease Finance Corp., Los Angeles.

ILFC Vice President Michael Platt told Bankruptcy Court Judge Linda Riegle that his company had identified a third-party investor interested in investing in the restructuring of National.

"We expect that ILFC would be a co-investor with the investor, although the allocation of equity between the investor, ILFC and potential other investors has not yet been determined," Platt said in a letter to National Chief Executive Officer Mike Conway.

Platt said ILFC and the investor -- believed to be Mark Travel Corp., one of the nation's largest wholesale travel companies -- hoped to deliver details to the court by Thursday. ILFC and National would not disclose the identify of the investor.

Creditors wanted National to have the opportunity to negotiate with ILFC and the mystery investor to keep the airline flying. But in order to do that, National needed casino operator Harrah's Entertainment Inc. of Las Vegas to extend a $16 million letter of credit so that National could immediately use much-needed cash generated by tickets charged to credit cards.

Harrah's, sensing that the judge would order the extension to keep the airline flying, crafted an agreement that would provide the letter of credit through July 31 -- and longer if a deal is in the process of being completed. To get the extension, National agreed to pay Harrah's $10,000 a day for the 35 days between June 26, the day the agreement was drafted, and July 31. If the agreement is reached, National doesn't have to pay anything.

Harrah's executives said they participated in the deal because they wanted to keep negotiations on track. The casino company, which lost about $39.4 million of its investment in National through December 2000, wants out of the deal because it says its competitors are getting a greater benefit from National's presence without investing any more money than Harrah's is. Harrah's has said only about 10 percent of National's inbound passengers stay at Harrah's or its Rio hotel-casino property.

But much has changed since the June court hearing and no one is talking on the record about the status of negotiations between National, ILFC, the mystery investor or any other suitors.

ILFC's Platt was quoted in the trade publication Aviation Daily that his company wants no financial interest in National, a contradiction of what he said in his letter to Conway. Platt's assistant said this week he is not commenting on negotiations involving National.

Attorneys for creditors say they haven't been apprised of what's happening in negotiations and representatives of National have been mum. Some observers have speculated that negotiations between ILFC, its mystery investor and National have stalled and that billionaire financier Carl Icahn may re-enter the picture.

Icahn, who is seeking an airline to carry passengers on tickets sold by his Las Vegas-based Lowestfare.com Internet travel company, offered $181.5 million to buy National last month. Conway said the Icahn bid wouldn't work because Icahn was counting on more payment concessions from creditors than National had considered.

Icahn's representatives could not be reached for comment this week on whether he would make another bid for National.

Since the June court hearing, National has filed another financial status summary with the court. The report shows National lost $3.7 million in May compared with a loss of $2.1 million the previous month.

A large portion of the loss was attributed to payments to aircraft lessors and was calculated at the contract rate prior to the bankruptcy filing. National has since negotiated with lessors for reduced payments, which would lower the net loss by the company for May to $1.6 million.

National spent about $6 million for aircraft leases for the month and about $5.9 million for fuel.

The expense of fuel and reduced demand for tickets by business travelers were the factors cited most frequently by airlines for their losses in second-quarter earnings announcements. In recent weeks, only three airlines -- Southwest, Continental and American Trans Air -- have reported making a profit for the quarter with most of the major carriers showing huge losses.

Since the bankruptcy filing, National has lost $25.8 million.

For the month, National's revenues were $29.9 million, about $964,749 a day, up from the $28.5 million, $949,789 a day, reported in April.

In May National flew 213,499 passengers, a 33.4 percent increase over the same period a year ago, according to McCarran International Airport statistics. In June, National's passenger count was up 36.1 percent over last year to 223,542. For the first six months of 2001 National has carried 1.2 million people, a 37.5 percent increase over the same period a year ago.