National Gets Needed Financing

With new $112 million plan, carrier expects to emerge from Chapter 11 in October

By: Jerry Chandler

After landing $112 million in financing last week, National Airlines is poised to fly out of Chapter 11 bankruptcy.

“This financial package displays the support the private sector has shown for our business plan, and their recognition of the evolution of the airline industry toward efficient, low-fare carriers,” said National CEO Michael Conway.

“It’s the kind of support the Air Transportation Stabilization Board did not display when it recently rejected National’s application for a federal loan guarantee.

“National spokesman Dik Shimizu declined to say who put up the money to save National. “I’m not in a position to discuss the breakdown [of financial participation], nor can I reveal who is participating in this package,” he said. Las Vegas casinos benefit significantly from the lift National provides to the city, especially from the East Coast. During Chapter 11 reorganization, Harrah’s Entertainment one of National’s key creditors has continued to show support for the carrier.

“The reorganization does not come without consequences for National employees. Conway said company workers “will continue [to incur pay reductions] for varying lengths and amounts, with the most significant burden borne by the management and pilot groups.”

“The company hopes new cash and employee concessions will convince travel agents who have been reluctant to book a Chapter 11 carrier to punch in the N7 code next time their clients are Vegas bound.

““That concern should no longer exist,” said Shimizu, who added he didn’t know how many agents were booking away from National because of its Chapter 11 status.

“Despite the fact that the airline continues to offer 10% uncapped commissions, the percentage of its bookings derived through the travel agency community has slipped since last year.

“While National is confident the $112 million package will eventually free it from Chapter 11 constraints, one aviation consultant is cautious.

““The usual caveats apply,” said Jack Keady, a Marina del Rey, Calif.-based industry observer. “Traffic to Las Vegas is highly competitive and very low-yield.” Because LAS is the quintessential leisure market, the amount of money generated by each seat flown to the city yields less revenue than, say, a business route such as Los Angeles-Chicago.

““National Airlines has always staked its whole being on having costs lower than their revenues which is a very, very difficult thing” to accomplish, Keady said.

“Conway appears confident his company can pull it off. The new financial package exchanges debt for equity, substantially reducing the carrier’s debt load. N7 hopes to successfully emerge from Chapter 11 in October, pending final documentation, modification of the company’s previously confirmed plan of reorganization and court approval.


National Airlines will drop twice-daily Las Vegas-Chicago Midway service Oct. 1, while retaining a quartet of daily departures to Chicago O’Hare.

The problem: A shortage of airplanes. Because N7 wants to start LAS-Reno service Oct. 3, it had to reallocate its limited fleet of Boeing 757s, said spokesman Dik Shimizu.