National cites ‘conflicts’ in loan process

August 20, 2002 10:38 AM


Though its bid for federal loan guarantees was shot down, National Airlines vows to keep flying. This month, the Las Vegas-based carrier expects to have 300,000 passengers ”” highest in its 3-year history.

Meantime, National CEO Mike Conway is fighting mad. He said he was "absolutely appalled" at the Air Transportation Stabilization Board’s decision to turn down the airline’s $50.5 million package.

"Not only did our application request that the government guarantee a smaller percentage of a loan than what other carriers have requested and received, but to my knowledge, National was the only airline to secure a significant amount of additional equity investment from the private sector,’’ Conway said.

Conway was further incensed that National’s largest competitor, America West, obtained a $380 million loan guarantee.

"Since receiving its funding, America West has followed a strategy that, in our opinion, is contrary to the very business plan they submitted in support of their application,’’ he said. "We advised the ATSB that since receiving the government guaranteed loan, America West has increased their service by approximately 50 percent in Las Vegas markets where they compete with National.’’

Charging that America West only increased its operations by some 5 percent in non-National markets, Conway filed a formal complaint with the U.S. Department of Justice.

National and Spirit Airlines of Florida, whose $54 million application was also rejected, contend that the ATSB Executives is unfair to small carriers. Citing America West and conditional approval of US Airways’ $900 million package, Conway pointed out that the consulting firm used by the board is partly owned by General Electric, which has a division that is one of the largest creditors of both the large carriers.

"The manner in which the ATSB has conducted the application process is replete with conflicts,’’ Conway alleged.

While warning its 1,500 employees that further layoffs ”” or even a shutdown ”” were possible, National said it was working on an "alternative plan" to keep flying without interruption.

A Las Vegas court hearing on National’s Chapter 11 bankruptcy case passed uneventfully on Monday. "We continue to have the support of our creditors and lessors,’’ said airline spokesman Dik Shimizu. Company executives also reported that National was continuing to aggressively court new investors. Another status report is scheduled for Aug. 27.