Click for printable version
Click to send to a friend

Click image for an enlargement

Wednesday, July 31, 2002
Copyright © Las Vegas Review-Journal

Vanguard halts operations, plans bankruptcy filing

Discount carrier's move grounds two Las Vegas flights

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

The Kansas City-based discount carrier has never shown an annual profit in eight years of operation. A recorded announcement on its reservation line early Tuesday said all flights Tuesday and today 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."

Vanguard's two daily nonstop flights between Las Vegas and Kansas City were canceled Tuesday, said McCarran International Airport spokeswoman Debbie Millett.

Millet was unaware how many passengers were displaced by Vanguard's shutdown, although she said its ticket counter remained open to redirect customers to other airlines.

"There wasn't a huge impact because they only had two (daily) flights," Millett said. "A lot of passengers have gone over to Southwest Airlines, but it really depends on where they were trying to go."

By Tuesday, Vanguard's gates at Kansas City International Airport were deserted except for media and security guards. A few Vanguard managers were there to explain the decision to any potential customers.

Bob Baker, who had flown in from Austin, Texas, to meet his son, was scheduled to fly to Las Vegas Monday night. "They just said they canceled the flight because of mechanical problems," Baker said Tuesday. "They didn't have any fuel."

The Air Transportation Stabilization Board announced Tuesday it had rejected a request that the federal government guarantee an $8 million loan for Vanguard. The board said the airline's "proposal did not provide a reasonable assurance that Vanguard will be able to repay the loan."

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

Cattell said Vanguard had made arrangements for ticket-holders to buy discounted tickets from Frontier and National airlines, and it is talking to other carriers about similar arrangements.

By Tuesday morning, Frontier had a link on its Web site providing information for Vanguard customers. The Denver-based airline said it would waive advance purchase requirements and other restrictions on fares purchased by Vanguard ticket holders.

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 1999.

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

Last month, Vanguard requested a $35 million loan guarantee from the Air Transportation Stabilization Board, a federal agency established by Congress to assist the ailing industry in the wake of last year's terrorist attacks. The airline had not received a decision on that request.

It wasn't the first request Vanguard had made to the agency. In May, the board decided not to approve a $13.5 million loan guarantee sought by Vanguard, saying the company's proposal "did not provide reasonable assurance that Vanguard will be able to repay the loan."

Michael Conway, president and CEO of National Airlines, said he hopes Vanguard can successfully reorganize. He added the ATSB has so far supported or committed to help what he called "large, major airlines" such as America West and US Airways and urged the board not to overlook smaller carriers in need of its support.

"Our industry is being led by efficient, low-fare carriers that are responding to today's more discerning travelers," Conway said. "We believe the pricing discipline they bring to the market should not be overlooked."

National Airlines filed for Chapter 11 in December 2000 and is currently seeking federal guarantees for loans totalling $50.5 million.

Vanguard ticket-holders who purchased tickets on or before July 29 are eligible for discounts and reduced fares to eight markets served by Las Vegas-based National Airlines, National spokesman Dik Shimizu said Tuesday. National also will waive certain advance purchase requirements on other fares.

Gaming Wire reporter Chris Jones contributed to this report.