Sun Country, Mark may court National

Friday, June 29, 2001 | 11:03 a.m.

Mark Travel Corp., one of the nation's largest wholesale travel companies and owner of Sun Country Airlines, is believed to be in negotiations to participate in the acquisition of bankrupt Las Vegas-based National Airlines, industry sources say.

The privately held company, owned and operated by founder William La Macchia, is based in Milwaukee and serves about 2 million customers per year. It's believed to be the so-called "mystery investor" described in U.S. Bankruptcy Court earlier this week as involved in the acquisition of National.

A spokeswoman for Mark Travel denied the company has met with National about an acquisition.

"No one from the company has met with National Airlines," said Holly Botsford of Milwaukee-based Mark Travel.

She said the company has no plans to enter negotiations to acquire National.

Representatives for National, which has operated since December under Chapter 11 bankruptcy protection, had no comment.

Two-year-old National has had an ever-increasing role in bringing gamblers to Las Vegas. In May, the company flew 213,499 people to and from Las Vegas, a 33.4 percent increase over the total in May 2000. National has carried 939,845 passengers to and from McCarran in 2001, recently leap-frogging Delta Air Lines as the fourth-busiest carrier at the local airport.

Through its partnership with Harrah's Entertainment Inc., which holds a 48 percent equity position in the airline, the casino company and National steered business to each other, but Harrah's estimates that only 10 percent of the people who fly National stay at Harrah's or its Rio hotel-casino, a sore point for the company.

International Lease Finance Corp., Los Angeles, the world's largest aircraft leasing company, emerged on Tuesday as a potential buyer for National. In an appearance before Bankruptcy Court Judge Linda Riegle, ILFC Vice President Michael Platt said his company was bringing an investor, described as a "major travel industry entity with significant ties to the Las Vegas market," to the negotiating table.

Citing confidentiality agreements, Platt did not identify the investor and said at the time it was too early to determine how big a role the investor would have in financing the proposed acquisition. ILFC brought the offer to the table in the wake of billionaire financier Carl Icahn withdrawing a $181.5 million bid for the airline.

With Icahn out of the bidding, National was within hours of beginning a shutdown of operations, since Harrah's was poised to begin diverting the airline's cash flow to start paying off some $17.4 million in loans. Harrah's already has written off nearly $40 million it had sunk into National.

But with the emergence of the ILFC proposal, Harrah's was convinced to change course and extend a $16 million letter of credit that enables National to be paid faster for credit card purchases of tickets by passengers. Attorneys for Harrah's, National and other creditors crafted a deal designed to speed up the negotiation process -- National would be required to pay Harrah's about $10,000 a day through July 31 untila deal is cut.

If there's no deal, National would owe an additional $350,000 to Harrah's. But if a deal is struck, National wouldn't have to pay anything.

With time a critical factor, La Macchia arrived in Las Vegas Wednesday, an industry source told the Las Vegas Sun. This source and a second executive familiar with National say La Macchia came to town to negotiate with ILFC and National.

Mark Travel Corp. is the parent company of 13 vacation programs that package airline tickets with hotel reservations and other amenities. Among the vacation programs under the Mark Travel umbrella are Mirage Resorts Vacations, Southwest Airlines Vacations, United Vacations and AeroMexico Vacations. Other Mark Travel brands are Funjet Vacations, Blue Sky Tours and Starwood Vacations.

La Macchia also owns Mendota Heights, Minn.-based Sun Country Airlines, operated by his son, William La Macchia Jr. Sun Country has flights to 30 destinations, including McCarran International Airport. From Las Vegas, Sun Country offers nonstop service to and from Minneapolis, Milwaukee, Detroit and Dallas.

Sun Country began scheduled service to Las Vegas in June 1999 after starting as a charter provider in 1983.

The airline currently is making over its fleet, recently retiring four DC-10 jumbo jets. It now has 12 Boeing 727 three-engine jets and four new Boeing 737-800 twin-engine jets. Later in the fleet upgrade, as more 737s are delivered, the 727s will be retired, a move that will save about 40 percent in fuel costs.

Mark Travel has grown every year since it was founded in 1974 as Funway Holidays and holds memberships in several domestic and international travel industry associations, including the U.S. Tour Operators Association and the American Society of Travel Agents.

It is one of Wisconsin's largest privately held companies, employing more than 2,400 people. It also has offices in 13 U.S. cities, including Las Vegas, three overseas offices and reservation centers in Denver, Detroit, Milwaukee, Salt Lake City and Orlando, Fla.

What Mark Travel would do with National Airlines is unclear. Experts say it could continue to run as a scheduled carrier independent of Sun Country or National's 16 Boeing 757 jets could be redistributed under Sun Country colors.

Regardless of what plan is taken, aviation expert Mike Boyd said a deal between Mark Travel and National could result in several positives.

"It makes sense all the way around," said Boyd, a consultant with the Boyd Group, Evergreen, Colo. "They could keep it as a scheduled carrier, but make it work like a charter.

"They'd have the best of both worlds, putting prearranged groups on the planes or offering seats as a scheduled carrier," Boyd said.

He said that by keeping the planes in the air, the creditors eventually would get paid and as long as the planes are kept on Las Vegas routes, the number of seats on flights destined for the city is bound to increase.

One possible down side to a Mark Travel-National deal would be in the status of vacation programs already affiliated with existing airlines. Southwest Airlines Vacations, for example, is one of the largest tour-packaging operations in Las Vegas. National currently competes with Southwest on several routes and the Dallas-based airline could also perceive a Mark Travel-National collaboration as competition.

Boyd said he thinks the Mark Travel affiliation is too valuable to Southwest to give up and that there's plenty of business in the market to go around.