Leaving Las Vegas

Carriers scramble to fill void left by National’s demise

By: Jerry Chandler

What’s next now that Las Vegas’ hometown airline is history? Will travel agents have to scramble to find seats for frustrated clients, or is lift sufficient to cover short- and mid-term needs?

National averaged 36 flights per day some 8% of McCarran International’s daily departures. Its fleet of 18 Boeing 757s flew approximately 200,000 people per month to Las Vegas, most of them leisure travelers, making it the city’s fourth largest carrier in terms of passengers.

But Hilarie Grey, public affairs manager for the Clark County Department of Aviation, contends that National’s demise Nov. 6 won’t cripple the city’s ability to fill hotel rooms.

“We really think that the only markets where we’re lacking seats that are highly in demand are Philadelphia, Miami and New York JFK,” she said.

To fill the sudden void, JetBlue moved up the launch of its JFK-LAS service from January to Nov. 15. By March, the low-fare carrier plans to field four A320s per day on the route. Also, American intends to begin nonstop MIA-LAS service in February and low-fare Spirit Airlines said it will begin nonstop Chicago-Las Vegas flights in December.

From the airport’s perspective, National’s shutdown hurts. But officials say they expect the healing process to be rapid.

“Over time, we think that other carriers will pick up the demand,” Grey said.

Virtually all observers were surprised that National tanked so suddenly.

“I was sort of hoping they would find a way to stay in business,” said Darryl Jenkins, director of the Aviation Institute at George Washington University. “I will miss having them around.”

Conventional wisdom has it that airlines can’t make money flying to Las Vegas. Because the city is largely a leisure destination, fares are low so seats yield less than they would on routes flown by significant numbers of business passengers.

But Jenkins disputes the notion that LAS is commercial aviation’s equivalent of a black hole. He said Las Vegas is Southwest Airlines’ largest origin and destination market. Not only does Southwest operate a virtual airbridge from major West Coast cities to LAS, it also offers nonstop service from smaller cities such as Texas’ Amarillo and Lubbock and even Albany, N.Y.

Mike Boyd, president of the Boyd Group, an aviation consulting group based in Colorado, said that National’s business plan made sense: frequent, low-cost, dual-class service from major population centers to the entertainment capital of the United States.

It would fill the void created by the traditional contempt that big airlines have for the place.

“The major airlines don’t give a rip about Vegas,” Boyd maintained.

Harrah’s Gamble

Headed by a creative, admired chief executive Michael Conway National attracted a legion of true believers, including Harrah’s Entertainment.

Harrah’s held a significant equity stake in National. The notion behind that stake went beyond reaping straight return on investment. Harrah’s wanted to fill its casinos, said a Harrah’s spokesman, David Strow.

“By helping a carrier based in Las Vegas, we could encourage travel to the city,” Strow said. “Air travel is absolutely crucial in getting visitors.” National may have brought more visitors to Vegas, but they didn’t necessarily spend their money at Harrah’s.

“Approximately 10% of the passengers flying on National Airlines actually stayed at Harrah’s properties in Las Vegas,” Strow said. “The remaining 90% stayed with our competitors.”

The upshot: Harrah’s believes that because other casinos benefited directly from the airline, they should have contributed to its bailout.

“Other people, if they had wanted this airline to stay, could have stepped up to the plate,” Strow said.

Harrah’s issued a letter of credit to National to help it fly through bankruptcy, which the carrier entered in December 2000. That helped, but Conway’s crew needed more. National applied for a federal loan guarantee from the Air Transportation Stabilization Board in February. On Aug. 14, the ATSB rejected the bid.

The government’s rationale? The ATSB didn’t agree that the guarantee was a necessary part of maintaining a safe, efficient and viable commercial aviation system in the United States.

Conway, appalled by the decision, called it “inconsistent” and “arrogant.”

He was joined by U.S. Rep. Shelly Berkley, D-Nev., who said, “The large carriers are being treated as if they are too big to fail, and smaller, more efficient carriers are being hung out to dry.”

Despite the rejection, National attempted to put together a $112 million reorganization package and was expected to emerge from Chapter 11 in October. Conway said, “We were very close to completing a successful reorganization on a few different occasions, only to have obstacles confront us at the last minute.”

One obstacle proved insurmountable.

“Supposedly, everything was moving forward in a very positive vein,” said Bill Mahaffey, manager of transportation for the Las Vegas Convention and Visitors Authority. “But at the final hour, $2 million disappeared from the table.’’

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