National still negotiating with creditors

Wednesday, Sept. 4, 2002 | 11:18 a.m.

Negotiations are continuing between bankrupt National Airlines and its creditors for concessions that could lead to new financing that would keep the airline flying.

National spokesman Dik Shimizu said today the airline "is in the latter stages of trying to complete that deal."

Meanwhile, Las Vegas-based National announced Tuesday that it is cutting two unprofitable daily round trips between McCarran International Airport and Chicago's Midway Airport and delaying its return to Washington D.C.'s Ronald Reagan National Airport. The fleet-juggling move will enable the airline to add four daily round trips between Las Vegas and Reno in October.

The airline will quit flying its flights to and from the Chicago airport Oct. 1 and hasn't determined when it would resume flights to the central Washington airport, which had been planned to begin Oct. 3.

Last year, the airline offered a single daily round trip to Washington National, but it was discontinued after the airport was closed to large planes after the Sept. 11 terrorist attacks. The airport eventually reopened to all aircraft, but National never returned but was gearing up for that as it added planes to its fleet.

Passengers ticketed to Chicago or Washington are being offered tickets on flights to Chicago's O'Hare International Airport, where National has four flights a day, or to Washington's Dulles International Airport on National's one daily flight, or a refund.

The airline is characterizing the withdrawal from Midway Airport as a temporary measure. In a press release issued Tuesday, Mark Suman, senior vice president of strategic planning, said, "We intend to resume service at Chicago Midway when the current airport construction is completed and we have the opportunity to offer a more desirable flight schedule than what is currently available."

National competes on the Chicago Midway route with Southwest Airlines, the busiest carrier at McCarran, and American Trans Air.

The schedule shuffling was necessitated by National's inability to add to its fleet of 18 175-passenger Boeing 757 twin-engine jets. The company failed to get a government-backed loan guarantee from the Air Transportation Stabilization Board on a $50.5 million loan approved by Foothill Capital Corp.

The company's failure to win the loan guarantee not only prevented National from going forward with its expansion plans, but it threatened the survival of the airline. In a hearing in U.S. Bankruptcy Court last week, the airline's attorneys said $30 million in new financing was negotiated with Foothill Capital, but it was dependent on creditor concessions and the extension of credit from key vendors.

By the end of the week, the key vendors -- Harrah's Entertainment Inc. and Mercury Air Group Inc. -- had filed stipulations in court agreeing to credit extensions through Sept. 30. Harrah's supplies National with a letter of credit enabling the airline to use money paid by passengers for future flights, while Mercury is the airline's fuel contractor.

The only remaining roadblocks were the concession agreements with creditors, which include the company's aircraft lessors. A hearing is scheduled Friday to update Judge Linda Riegle on the status of negotiations.