National Airlines owes McCarran $6 million

Monday, Aug. 26, 2002 | 10:55 a.m.

The top executive at McCarran International Airport says he doesn't think Las Vegas-based National Airlines can operate much longer.

"Of course, I don't know for sure, but it looks highly unlikely that they're (National) going to survive," Clark County Aviation Director Randy Walker said Friday on "Face to Face With Jon Ralston," a news program aired by Las Vegas ONE.

Walker noted the company is $6 million in arrears on local airport rental fees alone.

"I hope they survive, but I'm not really optimistic," Walker said in a show taped Friday. "I think their cash is running pretty thin. I think we'll know very soon ... within the next couple of weeks."

In a telephone interview after the Face to Face taping, Walker said National owes $6 million in post-bankruptcy petition leases for gates and counter space at McCarran.

"I realize that this is their biggest location, but I'd be surprised if they weren't also in arrears at other airports," Walker said. "They're not performing well enough to keep their leases current. I don't know how they can dig themselves out of a hole like this."

Walker said it has gotten to the point at which he has to consider his fiduciary responsibilities to Clark County taxpayers.

"I have to protect our assets," Walker said. "I've already turned down two airlines that wanted some of their space."

Walker said National and many of its supporters were optimistic earlier this year that the airline would get a federally backed loan guarantee through the Air Transportation Stabilization Board, but the firm's application was rejected this month.

"When that didn't happen, they went back to the bankruptcy court and said they were working on new financing, but it doesn't appear to be any different (than prior financing attempts)," he said.

National is scheduled to appear before Judge Linda Riegle on Tuesday to give an update on the company's latest attempt to finance continued operations. Company officials have said creditors are supportive of National's efforts because keeping the airline flying offers the best chance for them to be paid.

"Believe me, I hope they pull a rabbit out of the hat, fix the airline and fly," Walker said. "The (business) model is good, the product is good and I hope they're successful. But I also know the bigger the hole, the less probability that they can fill it."

Dik Shimizu, a spokesman for National, said the airline has been counted out on numerous occasions.

"Since December 2000, lots of people have thought we were going to quit," Shimizu said. "But we've continued to operate our full schedule and have even expanded. In July, we were the only carrier (at McCarran) to serve more passengers for the month over the same period a year earlier."

Shimizu said National is a closely held private corporation and that Walker "doesn't see our books."

Speculation about National's inability to continue operations went up a notch Aug. 15 when the ATSB rejected National's request for a $50.5 million government guarantee of a $60 million loan the airline needs for its bankruptcy reorganization plan.

Even prior to that, National's financial picture was far from rosy.

National has had 10 consecutive months of losses through June, according to documents filed with U.S. Bankruptcy Court in Las Vegas.

In June, the last month for which operational reports are filed, the company showed a $4.6 million loss, with $26 million in revenues and $30.1 million in expenses and the payment of $395,318 in bankruptcy reorganization expenses.

Airline officials, however, considered June a break-even month because results do not include contractual concessions National received from aircraft lessors as part of its reorganization plan. With reduced rental costs of $2 million and other contract modifications, the airline said it would have lost $611,487 for the month.

Since National filed for bankruptcy protection in December 2000, it has lost $82.1 million.

National officials were confident they would receive the ATSB loan guarantee, even though only two firms have received approval, one tentatively, since the program began last year after the terrorist attacks.

The two airlines that have received guarantees are major carriers -- US Airways, the one that has received tentative approval, and has since filed for bankruptcy protection itself; and America West, National's biggest rival.

Because only major carriers have won approval, Nevada's congressional delegation has accused the ATSB of favoritism, with Rep. Shelley Berkley, D-Nev., asking for an explanation in a letter dated Wednesday.

In a letter to ATSB Executive Director Daniel Montgomery, Berkley sought a detailed explanation for why National was rejected.

"In your formal explanation for denial, I ask that you include documentation of the board's position on granting loans to smaller carriers," Berkley's letter says.

"I agree that smaller carriers should not have been excluded from this process," she said. "However, the recent actions of the board indicate that smaller carriers have not had an equal opportunity. ...

"When I voted for the Air Transportation Stabilization Act, I intended the direct grants and loan guarantees to help maintain a healthy airline industry and preserve competition. Smaller, low-fare carriers are important for the continuation of such competition and they provide an attractive option to the flying public. These carriers should receive the same treatment as the larger carriers."

Berkley's office has yet to receive a reply from the ATSB.

Previously, the ATSB has not commented on individual cases before it. When the National decision was made initially, spokeswoman Betsy Holohan said the airline's application was carefully evaluated by the board and the decision was based on statutory applications. The three-member board's decision on the case was unanimous.