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LV Sands hopes gaming revenue will soar

Las Vegas Sands Corp. has purchased two L-1011 airplanes and is retrofitting the passenger airliners to serve as private jets that will chauffeur gamblers with large bankrolls to the company’s two Strip resorts from Asia.

In addition to the typical luxury items found on a casino company’s private aircraft, customers will also have an amenity at their disposal — high-limit baccarat tables to pass the time during the 14-hour direct flights.

A spokesman for the Federal Aviation Administration didn’t see any safety issues that would preclude the gambling. Nevada gaming regulators said there was nothing in state law that would halt the activity.

But any casino win from the gamblers obtained by Las Vegas Sands on the flights would not be subject to Nevada’s 6.75 percent rate on all gaming revenues, regulators said.

Gambling activity on private aircraft is viewed as similar to gambling on a cruise ship. The casino can only be open while the craft is in international waters. Cruise ship gaming revenues are not subject to any gaming tax collection, according to several legal analyses.

In July 2004, a University of Central Florida opinion said all cruise ship vessels with casinos sailing in and out of Florida are free from taxation by the state.

Nevada Gaming Control Board Chairman Dennis Neilander said Thursday there are no requirements for Las Vegas Sands to report revenues earned from a foreign gaming operation, which is what the private airline wagering activity would fall under.

“It looks like the law doesn’t address any gaming tax provisions,” Neilander said. “There are some references for income tax, and any wins by a customer might have to be recognized for income tax matters. There may also be some corporate taxes involved.”

In a letter dated Jan. 16, Las Vegas Sands officials told Nevada gaming regulators of its plans. Frederick Kraus, vice president and general counsel, said Las Vegas Sands would create a separate Nevada limited liability company that would lease the plane’s gaming space.

“In a nutshell, we plan to offer patrons traveling to or from The Venetian from Hong Kong the opportunity to play table games only and on credit only with no cash play on an L-1011 outfitted with table games and a surveillance booth and digital surveillance equipment while the aircraft is in international air space over international waters,” Kraus wrote to Neilander. The letter was copied to all three control board members, other agency staff and Las Vegas Sands officials.

On Monday, the company filed a Foreign Gaming Notification Statement with the control board, saying it planed to conduct foreign gaming in international waters over international airspace.

Neilander said that under Nevada law, the company must conduct foreign gaming within the same standards as the company would conduct business in Nevada and report that the activity took place. Neilander said he might ask the Nevada attorney general’s office for a legal opinion on the matter.

FAA spokesman Ian Gregor said the agency doesn’t regulate activity aboard private aircraft.

“We’re only concerned with safety and the (gambling equipment) would have to meet with safety standards,” Gregor said.

The Las Vegas Sands concept was revealed Monday during the company’s quarterly earnings conference call with analysts and investors. Deutsche Bank gaming analyst Bill Lerner asked company executives about buying two L-1011s and the strategy behind the planes.

Las Vegas Sands President Bill Weidner told Lerner that the company wasn’t required to comment on the planes. After a few moments, Weidner added, “They fly a long way. So we bring people along the way without stopping. People can smoke on them if it’s done in private.”

When Lerner asked if there would be any other activity on the planes other than just serving as transport, Weidner again said the company didn’t need to comment on the question.

Las Vegas Sands Chairman and CEO Sheldon Adelson added, “We don’t want to give our competitors the roadmap to success.”

Las Vegas Sands spokesman Ron Reese said on Tuesday the company wouldn’t comment on the aircraft beyond what was said on the conference call.

In the company’s third-quarter earnings filing with the U.S. Securities and Exchange Commission on Nov. 11, Las Vegas Sands detailed several items concerning its private aircraft.

The company said it entered into promissory notes totaling $72 million in February 2007 to finance the purchase of one airplane and to finance two others the company already owned. In April, Las Vegas Sands entered into promissory notes totaling $20.3 million to finance purchase of an additional airplane.

During the third quarter, Las Vegas Sands said it spent $89.9 million on capital improvement projects, which included corporate airplane-related purchases.

Gambling on commercial flights has been explored previously but never implemented. The concept was floated in the mid-1990s by Virgin Atlantic Airways but wasn’t pursued because of jurisdictional questions.

Around the same time, executives from MGM Mirage, which was then known as MGM Grand, discussed the idea. The company operated MGM Grand Airlines in the 1990s. MGM Mirage spokesman Alan Feldman said the matter was dropped after a brief discussion.

“It was probably discussed for about 15 minutes in conjunction with the idea of commercial carriers offering gaming. That was about the extent of it,” Feldman said.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871.

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