This article from NYTimes.com has been sent to you by psa188@juno.com. Vanguard Airlines Files for Bankruptcy and Suspends Service July 31, 2002 By EDWARD WONG Vanguard Airlines said yesterday that it was filing for Chapter 11 bankruptcy protection because it had failed to get financing and had been operating since Sept. 11 on a diminishing pool of cash. Vanguard, based in Kansas City, Mo., was operating 70 flights to and from 18 cities. It 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's announcement came on the same day that 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 at a time when 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." Mr. Dickson directly blamed the stabilization board for Vanguard's seeking bankruptcy protection, 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 to be 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." Michael E. Levine, a former airline executive who teaches government regulation at the Yale Law School, said that "if they had a credible business plan, they would have gotten financing." He said it was reasonable for banks or other investment groups to look at the agency's rejections as signs that Vanguard might not be creditworthy. Vanguard reported a net loss of $28 million last year. It had planned to report its second-quarter earnings this week, but will not do so now. Last December, the carrier applied for $55 million of backing on a $60 million loan, then later changed it to $13.5 million on a $15 million loan. That was rejected on May 28, and Vanguard then asked for $35 million of backing on a $40 million loan. It whittled that the $40 million figure down over the last month to $8 million. Vanguard operates a total of 14 planes, consisting of Boeing 737's and MD-80's. It is keeping a core staff of 80 people in case it gets enough financing to start operations again, said Elizabeth Cattell, vice president for marketing. Three airlines - United, Frontier and National - have said they will accept Vanguard advance-purchase tickets on their flights or offering discount fares, Ms. Cattell said. Industry experts said that just because Vanguard was filing for bankruptcy protection after the rejection did not mean other airlines would need to follow the same path if they were rejected. http://www.nytimes.com/2002/07/31/business/31AIR.html?ex=1029120294&ei=1&en=6673ca452a227e77 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company