VALUJET HAS warned that it may begin to run into problems with debt covenants by the end of September because of its grounding, which has been in place since mid-June in the wake of the Florida crash.
In a filing with the US Securities and Exchange Commission, the carrier says that it hopes to be able to avoid declaring any debt defaults and plans to open talks with its creditors.
The carrier still has a healthy reserve of cash, which stood at just over $200 million at the end of June and is in the midst of plans, which will see further cash come in from the sale or lease of a large slice of its idle fleet (Flight International, 14-20 August).
Although the cash buffer should allow the airline to continue making routine debt payments for an "extended period", that would quickly be eaten away if lenders chose to recall debts because of the grounding. ValuJet says that it has long-term debt of $162 million secured against its fleet.
ValuJet also has order worth around $1 billion for 50 McDonnell Douglas MD-95s. Progress payments of around $60 million are due to be made between now and 1998 before delivery of the first aircraft in 1999.
Two-year-old start-up Frontier Airlines has turned in its second profitable quarter, ending the three months to June showing a net result of $1.3 million. The Denver-based low-fares carrier had been making losses until the first quarter of this year. Sales in the June quarter doubled to $28 million.
Source: Flight International
