Las Vegas loses two flights in Vanguard shutdown

Tuesday, July 30, 2002 | 11:08 a.m.

SUN STAFF AND WIRE REPORTS

KANSAS CITY, Mo. -- Vanguard Airlines suspended operations today, saying it would lay off nearly all its employees and file for Chapter 11 bankruptcy protection.

The announcement comes on the heels of the airline being denied a federal loan guarantee from the Air Transportation Stabilization Board for a second time.

Vanguard's two daily round-trip flights between Las Vegas and Kansas City, Mo., where Vanguard is based, were canceled today and passengers with tickets on the airline were directed to other carriers. The company said it already has made arrangements to route stranded passengers to Frontier and National airlines.

Southwest Airlines is the only other carrier at McCarran International Airport that has nonstop flights to and from Kansas City with five daily flights and one that operates six days a week. A Southwest spokeswoman said today the airline has no agreement to fly Vanguard passengers.

The discount carrier has never shown an annual profit in eight years of operation. A recorded announcement on its reservation line early today said all Tuesday and Wednesday flights had been canceled and all other flights scheduled after that have been suspended indefinitely.

"The company is seeking funds in order to resume operations," the announcement said. "The company intends to file for protection under Chapter 11 of the Federal Bankruptcy Code."

Elizabeth Cattell, Vanguard's vice president of marketing and advertising, said nearly 1,100 employees, including about 915 in Kansas City, would be terminated before the Chapter 11 filing. A skeleton crew of about 60 will stay in hopes that additional financing can be obtained.

Vanguard has no employees based in Las Vegas. Because the airline only had two flights a day to and from McCarran, the company opted to contract its ground operations to Delta Air Lines.

Vanguard's chairman and CEO, Scott Dickson, told The Kansas City Star: "We have done everything in our power to avoid today's actions."

The airline industry has been under immense financial pressure because of the economic downturn and the impact of last year's terrorist attacks. In the second quarter, the nation's major carriers reported more than $1.4 billion in losses.

Other smaller carriers, such as Midway Airlines and Sun Country Airlines, have also filed for Chapter 11 in the past year.

Sun Country resumed operations in March after shutting down earlier in the year. Midway, meanwhile, which filed for Chapter 11 a year ago, could be forced by a bankruptcy court judge in North Carolina to shut down and liquidate its assets. The Morrisville, N.C.-based carrier was accused by a court administrator last week of filing "incomplete, evolving and conflicting" financial data with the court.

Vanguard's financial problems are not new. Its last quarterly profit was in 1998.

With a fleet of twin-engine jets, six Boeing 737s and seven MD-80s, Vanguard has specialized in low fares. Its recent schedules listed 17 destinations.

Last month, Vanguard requested a revised loan guarantee from the ATSB, a federal agency established by Congress to assist the ailing industry following last year's terrorist attacks.

The ATSB announced today that it had denied Vanguard's application, concluding that it "did not meet the applicable standard."

In a statement issued this morning, the ATSB said Vanguard's proposal "did not provide a reasonable assurance that Vanguard will be able to repay the loan, one of the factors the board is required to consider under the (Office of Management and Budget) regulations."

Las Vegas-based National Airlines, which is operating under Chapter 11 bankruptcy protection, is awaiting a decision from the ATSB for a similar loan guarantee, of $60 million.

It wasn't the first request Vanguard had made to the ATSB. In May, the board decided not to approve a $13.5 million loan guarantee sought by Vanguard.

In a July 18 interview, Dickson told the Associated Press he thought Vanguard would be able to find funding to restructure its debt. He added, however, that "bankruptcy is not necessarily to be feared."

"In the airline industry, more often than not you can keep right on flying through bankruptcy. I mean, most airlines do," he said.