National puts last touches on reorganization plan

Wednesday, Feb. 27, 2002 | 11:02 a.m.

National Airlines, close to having a bankruptcy reorganization plan approved by a federal judge, was delayed one more time Tuesday.

The plan now is expected to be approved Monday -- a date Judge Linda Riegle referred to as the "third final confirmation hearing" on the issue. The airline had expected to win final approval in a hearing earlier this month.

National, which recently surpassed No. 3 United Airlines in the number of daily flights it offers to and from Las Vegas with 30, filed for Chapter 11 bankruptcy protection in December 2000.

Craig Hansen, National's lead attorney, told Riegle by telephone Tuesday that all the key creditors in the Las Vegas-based airline's bankruptcy case are in agreement on the plan and it was just a matter of attorneys taking a final look at the the last draft of the document before signing off on it.

Airline officials expected the judge to approve the plan pending a final review by attorneys representing about 1,000 creditors. But Riegle decided instead to put another hearing on the calendar to finish the job.

"We're just down to the nits on the documentation," Hansen said.

Going into the previous attempt to approve the plan Feb. 14, attorneys had three minor disputes:

Riegle said at that hearing she wanted those issues resolved by Tuesday's hearing in U.S. Bankruptcy Court in Las Vegas or she would take testimony on the disputes.

Hansen said all of the disputes were resolved, but attorneys wanted one last look at the agreement before proceeding.

Approval of the plan is important to National because it is a key step in the company's application for a $70 million government-backed loan. Securing that loan will enable the reorganization plan to take effect. And, the reorganization plan will enable the airline to press ahead with expansion -- which National already has announced.

National must convince the Air Transportation Stabilization Board in Washington it is recovering from effects of the Sept. 11 terrorist attacks and was financially viable before that incident occurred. One of the prerequisites of consideration for the government loan backing for a company emerging from bankruptcy is to have a court-approved reorganization plan in place.

National's attorneys have been coordinating approval of the plan while preparing for the loan application.

The board must determine whether the company is a credit risk worthy of backing a loan that National is getting from Foothill Capital Corp., a subsidiary of Wells Fargo Bank. Hansen has said the airline hopes to be approved for the full $70 million loan but the reorganization plan could succeed if as little as $45 million in loans are backed by the government.

Earlier this week, National announced introduction of service to Seattle with three nonstop round-trip flights and the addition of a fourth round trip to and from Dallas-Fort Worth. Tuesday, National announced it would substitute one of its round-trip flights to Chicago's Midway Airport with one to and from Chicago's O'Hare International Airport, beginning March 6.

National officials said the airline will acquire new aircraft to accommodate the Seattle route and Dallas expansion.

National Chief Executive Officer Mike Conway, who attended Tuesday's hearing, acknowledged the airline is walking a thin line between gearing up for new service while not appearing too confident about its application for the loan guarantee, which is part of a $10 billion aviation industry bailout program.

Conway said National already submitted documents that outline the company's business plan to the Air Transportation Stabilization Board last week.

"It says, 'Here's all the support that, in our view, shows we have the ability to honor the terms of our agreement,' " Conway said.

He added "nobody can rightfully say it (the loan guarantee) is a slam dunk."

Meanwhile, National has announced the start-up of Seattle service May 23. Conway said it important for the airline to precede service with an announcement 60 to 90 days ahead of the start-up in order to generate advanced ticket sales.

Conway said National, which lost $4.6 million in December but remains a key carrier of tourists to Las Vegas, is projecting high loads but low yields in the spring and summer months -- a concept similar to those in the Las Vegas resort industry.

He said current and advanced bookings show loads in excess of 70 percent with a steady increase in ticket prices that will improve yields. He said he doesn't expect yields to match year-ago levels until at least August.

Similarly, Las Vegas' hotel industry discounted rooms to stimulate visitation and only recently have begun bringing them back to pre-Sept. 11 price levels.