National in red for February
Wednesday, May 1, 2002 | 11:19 a.m.
National Airlines continued to lose money in February, posting an $8.3 million loss, the Las Vegas company disclosed in a U.S. Bankruptcy Court filing.
Airline officials couldn't be reached for comment today on the company's financial performance in March and April.
The airline, whose bankruptcy reorganization plan would take effect if and when a federal loan guarantee is approved by the Air Transportation Stabilization Board, is following a trend set by most other airlines that collectively lost $2.4 billion in the first quarter of 2002.
National is the No. 5 carrier in passengers served and No. 4 by capacity at McCarran International Airport. Providing 5,325 seats a day -- 8.5 percent of the total market share -- from nine cities, National is a key long-haul operator bringing tourists to the gambling capital from Chicago, Dallas, Philadelphia, New York City and Miami.
In a bankruptcy status hearing Tuesday, National attorney Craig Hansen told Judge Linda Riegle that a formal loan guarantee application to the three-member ATSB would be filed later this week. Hansen said he expects the board to act on the proposal within two weeks of its filing.
National is seeking a $70 million loan. Only one airline -- National rival America West Airlines -- has successfully navigated the ATSB process, getting a $380 million loan guarantee in December.
Hansen said National is taking a different approach than other applicants on its loan request, meeting privately with ATSB staff and submitting several draft documents before formally applying for the loan guarantee. The airline hopes to streamline the process without making any of its submissions public. The airline has declined comment on specifics of its application.
"Obviously a lot of people are trying to read the tea leaves to determine what all this means," Hansen said in court Tuesday.
The meetings with the ATSB staff, he said, were filled with "a lot of healthy give and take."
As for the status of the airline, Hansen said advance bookings for the carrier -- particularly on the new service between Las Vegas and Seattle that starts later this month -- have been at record levels. But he also acknowledged that National also has seen low yields, or revenue per flight, a problem other struggling airlines have acknowledged as they attempt to climb out 2001 business travel doldrums and post-Sept. 11 downturns.
Mike Boyd, an aviation expert with the Evergreen, Colo.-based Boyd Group, said in addition to suffering the same post-Sept. 11 downturns experienced by other airlines, National is continuing to battle for market share in Las Vegas against strong competitors, like dominant discounter Southwest Airlines.
Boyd said he thought National had a winning game plan, but customers haven't embraced the airline in sufficient numbers.
"I thought (National's) business plan made sense, but that some of their costs were a little out of whack," Boyd said. "I don't know what the problem is, but people don't seem willing to spend to go to Vegas on National."
Boyd said in some locations -- like Chicago's Midway Airport -- customers are loyal to Southwest and will fly it to Las Vegas because of the low fares it offers without even checking a competitor like National. When National began flying, he said, Southwest began adding new Boeing 737-700 jets capable of long-range flights that are National's core market.
Southwest has also added flights to Las Vegas from secondary markets where fliers previously faced long drives to bigger airports to catch non-stop Las Vegas flights. Southwest has also competed effectively by avoiding some high-cost large airports and established flights from secondary nearby airports like Islip, N.Y., which competes with New York City's two airports.
"Who'd have thought a few years ago that you'd have Albany (N.Y.)-to-Las Vegas nonstops (on Southwest) that are doing very well?" Boyd said.
The company reported $17.5 million in operating revenues in February -- 3 percent ahead of what airline officials had forecast. But expenses were $24.8 million, about 17 percent more than projected. Key expenses were aircraft leases, $5.5 million, employee wages, $4.2 million, and fuel costs, $3.2 million.
The airline also reported $792,625 in fees associated with bankruptcy expenses for the month.
Most of the aircraft leases have been renegotiated as part of the reorganization of the company's finances so the new contractual rate would have lessened losses. With reduced payments at a lower level, the airline's net loss would have been $6.4 million for the month.
Hansen said National has been monitoring fuel costs -- one of the factors that led to the company's December 2000 bankruptcy filing. He said the cost to the airline has been around 60 cents a gallon, which is in line with what officials expected.
Because the reorganization plan is dependent on the loan guarantee, attorneys have nailed down agreements with key suppliers to extend into June. In addition to the crucial fuel contract, National also got an extension from one of its original investors, Harrah's Entertainment Inc., for a letter of credit that enables the airline to be paid in advance for future ticket sales.
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