Thursday, November 07, 2002
Copyright © Las Vegas Review-Journal

LAS VEGAS-BASED CARRIER: National Airlines ends run

Bankrupt operation can't recover

Financial problems permanently grounded National Airlines on Wednesday, ending a brief and turbulent run for the Las Vegas-based carrier.

Only 41 months after its inaugural flight left McCarran International Airport on May 27, 1999, National Airlines Chairman and Chief Executive Officer Michael Conway announced late Wednesday afternoon the bankrupt airline would shut down.

"This is a very sad day for the 1,500 employees of National Airlines, the city of Las Vegas and Southern Nevada, as well as the traveling public who now have one less choice to meet their travel needs" Conway said in a statement.

"We exhausted every possible viable alternative in seeking funding to maintain our ability to fly and serve hundreds of thousands of people each month. Unfortunately, we could not obtain the support necessary and were forced to make the very difficult decision to cease operations."

National had operated under bankruptcy protection since December 2000 and recently tried to organize a $112 million debtor-in-possession financing package that was contingent upon the carrier securing three letters of credit as collateral for a $25 million loan from Foothill Capital, a subsidiary of San Francisco-based Wells Fargo & Co.

But last month an unnamed party in the airline's reorganization plan withdrew its pledge to contribute $2 million, a move that effectively doomed the airline.

Conway's statement said National "was unable to complete a previously announced agreement to the satisfaction of its senior management, board of directors, aircraft lessors and other key creditors."

Through September, National had carried 1.85 million passengers through McCarran in 2002, making it the airport's fourth-largest carrier based on passenger volume. The carrier operated an average of 35 daily flights between Las Vegas and 11 other U.S. airports.

Departing at 4:20 p.m., National Flight 354 was the carrier's last to leave the airline's Las Vegas hub. All outgoing flights scheduled to depart from McCarran at 4:30 p.m. or later, about 17, were canceled, airport spokeswoman Hilarie Grey said.

"Anything that wasn't in the air before 4:30 isn't going anywhere," Grey said.

National spokesman Dik Shimizu said he did not know how many passengers were affected by the airline's announcement, but he said Wednesday is typically one of the airline's slower travel days when flights are normally 50 percent filled. Still, many would-be passengers were seen scrambling to locate their luggage and book alternative flights out of town late Wednesday.

That task was complicated too by the reaction of some National employees after they heard the news that they were being laid off at the end of their work day without any severance pay.

A number of passengers and one Department of Aviation official, who asked not to be named, said they observed some National employees immediately walk off the job shortly after the announcement.

Others reported watching National employees hugging and crying during farewells with their colleagues.

Many airlines serving McCarran, including Southwest, America West, Alaska Air, Delta and Continental, were making arrangements to help ticketed National passengers over the next few days, usually on a standby basis and with a fee attached.

National announced that it would not issue refunds and advised customers who charged their tickets to contact the credit card companies for a refund.

Richard Sulzer was one of the passengers inconvenienced. The New Yorker had stopped in Las Vegas to catch a connecting flight to Los Angeles for a business trip. He wound up pleading in vain with members of National's baggage crew who could not locate his missing luggage.

"I've been waiting five hours for my luggage," Sulzer said. "There's nobody around here that's working anymore."

As several former National employees sped out of the parking lot at the airline's corporate headquarters, laid-off senior flight attendant Scott Schmidt said he was disappointed but not surprised to learn the airline had failed.

"We all knew it was inevitable," said Schmidt, who had worked for National since January 2000. "The employees have been on pins and needles ever since the airline filed for bankruptcy (in December 2000)."

Still, Schmidt said he was upset with how National management failed to keep its workers current on the company's finances.

"Management's failure to communicate with us was not up to par," said Schmidt, who added National's employees last were informed of the company's financial status in late August.

Clark County Aviation Director Randy Walker spoke with several passengers displaced by National's closure.

He said his staff's priority will be helping those stranded at McCarran and said airport employees would work overtime Wednesday to help passengers.

Walker was optimistic many passengers would be able to find alternate flights out of the city because Wednesday is typically a slow day at McCarran. He said those scheduled to travel later this week could experience difficulties.

"There aren't going to be as many available seats starting (today) because those flights are going to be more heavily booked," Walker said.

Unwilling to chance spending several more days in Las Vegas, Carol Lott said she and her husband paid America West Airlines $215 each for one-way tickets for a Wednesday flight to their home city, San Francisco.

"We only paid $117 (each) for round-trip tickets to get here on National, but we had to pay more tonight because we've got to get back home to run our business," Lott said.

Walker said McCarran is closed from 2 to 6 a.m. and was uncertain how the airport's staff would handle displaced National passengers who may want to sleep in its terminal overnight.

Walker said National's business plan could not overcome two events: increases in the cost of jet fuel during the summer of 2000 and last year's Sept. 11 terrorist attacks.

"Established airlines are in trouble after those events, so you can imagine how hard it would be for a start-up," said Walker.

Jeremy Aguero of Applied Analysis said National's closing bears witness to the slump in tourism.

"This is the ripple effect," he said. "This is the problem that happens when our economy has an extreme shock to it and some companies don't have the ability to recover."

Walker added he is not optimistic National would pay back the approximately $7 million it owes McCarran in overdue landing fees, rent and other expenses.

"I don't imagine we'll get paid anything," Walker said. "They don't have any money."

Walker said the airport was planning to store National's aircraft at McCarran until they could be picked up by the company's lessors.

To attract more visitors from the East Coast, Harrah's Entertainment and the former Rio Hotel & Casino Inc., now owned by Harrah's, each contributed $15 million toward the start-up costs of National Airlines in July 1998.

Although his company sold its ownership stake in the airline last year, Harrah's spokesman Gary Thompson said he was disappointed to see National fail.

"They were one of the largest low-fare carriers serving this market, and we're truly sorry to see this turn of events," Thompson said.

But Thompson said National's closure should not have much effect on the city's travel industry, a sentiment echoed by MGM Mirage spokesman Alan Feldman.

"The other airlines will pick up the traffic, and it's unfortunate for locals. They offered some great fares and kept the other airlines on their toes as far as fares go," Feldman said.

Review-Journal and Gaming Wire reporters John Edwards, Hubble Smith, Rod Smith and Frank Curreri contributed to this story.