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
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.”
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
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.