National’s Anthem: We Will Survive

Carrier works through loan guarantee setback; asks travel agents to drop service fees when selling its tickets

By: Jerry Chandler

While saying “Don’t count us out” in the wake of the denial of a critical federal loan guarantee, Las Vegas-based National Airlines is also reconsidering its highly publicized policy of paying travel agents 10% commission.

In July 2001, 31% of National’s tickets were sold through brick-and-mortar travel agents. For the same month this year, the figure was 28%.

“That’s baffling, considering that we’re the only one out there paying 10%, no cap,” said spokesman Dik Shimizu.

Because National wants to hold onto its price advantage over some competitors, it’s asking agents to drop service charges when selling its tickets. The carrier’s rationale: “We already pay you 10%, you can afford it; you win, we win.”

So far, the call appears to be striking out.

National’s application to the Air Transportation Stabilization Board for a government guarantee of $50.5 million of a $60 million loan from Foothill Capital, a Wells Fargo subsidiary, fell flat. The ATSB rejected the request, stating that it wasn’t confident the carrier could repay the money.

National President and CEO Michael J. Conway said he was “absolutely appalled by the decision,” calling the ATSB’s ruling “subjective, at best. National (which continues to fly under Chapter 11 bankruptcy) has met the forecasts included in our business plan for the past nine months and we have no reason to believe that we will deviate from that positive trend.” Conway’s assessment isn’t singular.

“ATSB was very remiss in not approving that loan guarantee,” said aviation consultant Mike Boyd, president of the Evergreen, Colo.-based Boyd Group. “This is an airline that’s up, it’s running and it’s carrying good loads. It’s important to the economy of Las Vegas.”

Bill Mahaffey, manager of transportation marketing for the Las Vegas Convention and Visitors Authority, agreed. “National Airlines has become a mainstay in Las Vegas,” he said. “They’ve devoted their efforts to becoming Las Vegas’ hometown airline.”

Staying Aloft

National has helped keep fares to Las Vegas low, but the real lift the carrier has provided is linking LAS nonstop to key East Coast cities on a frequent, nonstop basis.

What remains to be seen in light of the federal loan guarantee rebuff is whether the airline can remain aloft for much longer. Shimizu said National is now working on plan B up to $30 million in debtor-in-possession financing. “That ... is subject to receiving letters of credit backing that loan,” he said.

Despite the wretched shape of the airline industry and ATSB’s denial of a loan guarantee that could have catapulted the carrier out of Chapter 11, Shimizu said, “We always look at the glass as half-full.”

Boyd thinks that glass could prove to be an elixir.

“They’re in a good marketplace,” he said. “They have a good battle plan, and they are important to the economy of Las Vegas. Las Vegas, especially at this juncture, needs low-fare seats.”

As the summer season comes to a close there are two immediate issues: Who, if anyone, will provide the credit to keep the carrier flying? And, will agents shuck service fees on National tickets to help the carrier maintain a price advantage in its home market?

Both answers are blowing in the hot desert winds.

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