Vanguard Airlines filing for bankruptcy protection

Mo.-based carrier blames failure to get financing


Vanguard Airlines said yesterday that it is filing for Chapter 11 bankruptcy protection because it has failed to get financing and has been operating since Sept. 11 on a diminishing pool of cash.

Vanguard, which is based in Kansas City, Mo., and was operating 70 flights to and from 18 cities, suspended service at 1 a.m. yesterday. It has been in business since 1994, but has not been profitable in the six years it has been a public company.

The airline made its announcement on the day federal officials said they had turned down Vanguard for a loan guarantee. Vanguard had applied for backing on nearly all of an $8 million private loan.

The government set up a $10 billion loan-guarantee program after Sept. 11 to help airlines get private financing. Many investors have shied away from the industry. The program is administered by the Air Transportation Stabilization Board, which in May rejected Vanguard's first application for a loan guarantee.

"This is a disappointing day for everyone here at Vanguard Airlines," Scott Dickson, the chief executive, said in a written statement. "Much has been accomplished in the past year, especially in light of the events of Sept. 11. Unfortunately, our very public efforts to secure financing through either the private markets or federal government have come up short."

Dickson blamed the stabilization board for Vanguard's bankruptcy move, saying the agency "never seemed to grasp the intent of the enabling loan-guarantee legislation: restoring liquidity to all airlines badly hurt by the events of Sept. 11 and ensuring that the traveling public will continue to benefit from a competitive airline industry."

Vanguard's shares, which traded as high as $287 in 1996, closed yesterday at 25 cents, down $1.

In its rejection of the application, the agency said the airline "did not provide a reasonable assurance that Vanguard will be able to repay the loan."

Industry experts also said the three-member voting board was right to reject Vanguard because the airline had a flimsy business model and had not proved itself creditworthy.

"The only reason these guys are in business this long is that the investors have been too kind in giving them money to cover their operating losses," said Darryl Jenkins, director of the Aviation Institute at George Washington University, based in Ashburn, Va. "If they went out of business, nobody would miss them. This is ridiculous for them to blame their problems on the stabilization board. Their problems existed before 9/11."

Vanguard reported a net loss of $28 million last year.

Three other airlines, United, Frontier and National, have said they will help Vanguard passengers by accepting Vanguard advance-purchase tickets on their flights or offering discount fares, said Elizabeth Cattell, Vanguard's vice president for marketing.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.