Airline’s closure marks a ‘sad day’

Liz Benston and Grace Leong

Thursday, Nov. 7, 2002 | 11:13 a.m.

Two months after reporting its first profit since the terrorist attacks that devastated the nation's airline industry, Las Vegas' only hometown airline shut down for good Wednesday evening.

After nearly two years in bankruptcy court, National Airlines pulled the plug just before 5 p.m. Wednesday, immediately throwing about 1,500 employees out of work.

B.R. McDaniel, owner of Las Vegas travel agency A Quick Trip Inc., today said fares on many routes that National used to fly had jumped 50 percent or more since National shut down.

McDaniel, who said she has spoken to more than 35 travel agents since 4 a.m. today, said many agents are livid that the government and the hotel-casino industry "did nothing to rescue National" and that many airlines were taking advantage of National's closure to hike prices.

McDaniel, who said she was in the process of changing over more than 200 National passengers to other airlines, said those who bought tickets in advance for the Thanksgiving and Christmas holidays are probably going to have to pay three times more what they had paid for their National tickets.

"Those who want the airlines to honor National's tickets and aren't willing to pay more, will have to go on standby and you may sit there for days. These airlines are going to take care of their paying clients first then National's," she said.

National flew to Chicago, Dallas, Los Angeles, Miami, New York, Newark, N.J.; Philadelphia, Reno, San Francisco, Seattle and Washington, D.C.

Its Las Vegas competitors on one or more of these routes included Southwest, America West, American, United, Delta, Continental, US Airways, American Trans Air and Alaska Airlines.

McDaniel, who said these airlines were matching National's roundtrip fares until Wednesday, said those who paid $150 for a National ticket to Seattle would now have to pay $178 or more on United, Alaska Airlines and America West.

Those who paid $98 for a National ticket to San Francisco are now looking at $144 or more for a ticket on America West, United and American, she said.

Those who paid $138 for a National ticket to Chicago were being charged at least $198 on America West, United, American, Continental, American Trans Air, Alaska and US Airways, while those who paid $218 for a National ticket to Miami were being charged at least $300 on the other airlines, she said.

Janice Monahan, an America West spokeswoman, disputed McDaniel's claims.

"We've not changed our price point," she said. "The higher prices are due to a lack of inventory availability. Some flights, say, those tickets at $98 to San Francisco, which are among our lowest-fare class tickets, are completely sold out, so prices are based on the next available fare class, if any are left."

"Prior to National's announcement, there were systemwide pricing adjustments made by airlines and America West was involved in that," she said. "With reduced capacity by a number of airlines since 9-11 and America West running high load factors and seeing strong bookings, that gave us an indication that a marginal increase in prices is a possibility."

Earlier, as workers at the company's headquarters near McCarran International Airport hugged each other and left the building carrying boxes of personal items Wednesday, a company spokesman announced that the company had made a decision that allows for an "organized" shutdown.

Employees won't have to worry about not receiving their last paychecks, and National flight crews and other airline staff were being flown back to Las Vegas, spokesman Dik Shimizu said.

National wasn't flying any passengers into Las Vegas as of Wednesday evening. Other airlines are accommodating National customers who may be stranded in airports nationwide. And National will employ a few key workers over the next couple of weeks to aid in the shutdown.

National Chief Executive Michael Conway called the move "a very difficult decision" and "a sad day" for employees, local residents and travelers nationwide.

"We exhausted every possible viable alternative in seeking funding to maintain our ability to fly and serve hundreds of thousands of people each month," Conway said in a statement.

In the statement, Conway also vented his frustration with the Air Transportation Stabilization Board, an agency set up after the Sept. 11 attacks to distribute up to $10 billion in federal loan guarantees to struggling airlines.

"The ATSB is choosing winners and losers, notwithstanding direction from Congress to the contrary."

The announcement comes about a week after the news that an aircraft leasing company that had pledged a $2 million letter of credit backed out of the deal.

National attempted to strike deals with other potential lessors and investors but wasn't able to find a replacement company to fill the hole, part of a $112 million financing package that the company announced in September as a potential solution that would help it emerge from bankruptcy.

The letter of credit was significant because it would have served as collateral for a $25 million loan from Foothill Capital Corp. But with the airline industry continuing to bleed money, lessors have been skittish about making deals, Conway had said.

The failed deal was only one of several factors prompting the shutdown, Shimizu said.

The entire $112 million financing package was complicated, with several companies involved as creditors.

"We could not reach an agreement with all the parties involved," he said.

Cash flow has been a problem, especially in regard to credit card purchases of airline tickets, he said.

Only two credit card companies would process tickets purchased on National Airlines because of its startup status, he noted. The issuers held onto the money until passengers actually flew the airline, meaning that National couldn't access the money right away. A credit backing arrangement from casino giant Harrah's Entertainment Inc. had allowed the airline to obtain needed cash from ticket purchases up front.

But even that wasn't enough.

"We got to a point where essentially we could not afford to continue to move forward," Shimizu said.

Since the airline declared bankruptcy in December 2000, it has approached "practically anyone we had any kind of relationship with," including companies in foreign countries and major casino companies, for help, he said.

He declined to reveal names or say whether National had specifically approached Harrah's -- an original investor that was instrumental in its support for the startup airline -- for further support.

The Las Vegas-based casino empire, also the nation's most geographically diverse, had pledged $15 million to fund the airline. The Rio, a casino Harrah's purchased in 1999, had pledged another $15 million.

National made $1.2 million in August -- turning its first profit since last year's terrorist attacks, according to documents filed in U.S. Bankruptcy court documents.

An aircraft maintenance employee leaving the company's headquarters Wednesday, who declined to be named, said he questions what happened to that money.

"We didn't see it in maintenance," he said. "This is a private company. We don't know where the money went."

Other employees, who also declined to be identified, said they were saddened by the news and liked the camaraderie that came from working for a startup airline.

"We did a hell of a job on virtually nothing," one said. "We kept planes in the air and we kept them safe."

Ultimately, worker loyalty remains with Las Vegas air service, not necessarily National, the employee said.

"We wouldn't care who sat in that office," the worker said. "If somebody stepped, we'd hit the ground running and have planes up in the air tomorrow."