Ramon Lopez/WASHINGTON DC
High-profile US start-ups National Airlines and Legend Airlines have entered the US bankruptcy courts, with high fuel prices and launch costs a common factor in the pair's troubles.
National filed for Chapter 11 protection from creditors on 5 December, but has vowed to maintain service to 10 US destinations from its Las Vegas hub, and to go ahead with the launch of flights to Chicago next month.
The carrier's president and chief executive Michael Conway blames escalating fuel prices for financial problems which have reversed a trend that saw it post a $2.4 million operating profit in the quarter to 30 June after taking a $45 million loss the previous year. Conway claims the "situation is a short-term issue that can be successfully managed through reorganisation".
National launched low-fare scheduled services in May last year. It operates twelve 175-seat Boeing 757-200s in a two-class configuration, with options for eight more.
Legend Airlines ceased operations on 2 December and filed for bankruptcy protection the next day. Legend aims to compete in the business travel market with Dallas/ Fort Worth-based giant American Airlines from nearby Dallas Love Field, but was launched only after a three-year legal battle.
The carrier's president and chief executive Allan McArtor says it halted service because of a cash-flow crisis caused by high fuel, start-up and legal costs. "We believed we had secured additional funding. When the funds were not made available, our only choice was to temporarily suspend operations," he says. "Our intent is to resume flying as quickly as we can."
McArtor says he still hopes to secure a multi-million dollar bridging loan and to resume flying by the year-end, although no 'white knight' had emerged by the eve of a 7 December court appearance at which Legend was due to present a restructuring plan.
Legend raised $62 million to launch all-business class flights to New York, Washington, Los Angeles and Las Vegas, employing seven 56-seat McDonnell Douglas DC-9s. It is believed to have lost $44.7 million since its launch.
Source: Flight International
