LAS VEGAS -- The failure of a $2 million financing deal threatens to kill National Airlines' Chapter 11 bankruptcy reorganization plan and might ground the struggling airline, a company official said Thursday.
"We've said in the past that unless we are able to successfully negotiate a deal to reorganize, the reality is we would shut the airline down," said Dik Shimizu, spokesman for the Las Vegas-based airline.
"That said, we continue to operate our business as usual," Shimizu said and added that there were no immediate plans to stop flying.
National filed for bankruptcy in December 2000. Company executives and lawyers are trying to cobble together lending and financing agreements to keep their fleet of 18 leased planes flying to 12 U.S. cities.
Craig Hansen, lead attorney for the airline, said at a bankruptcy court hearing Wednesday that an aircraft leasing company had pulled out of a $2 million deal to lease one more plane to National. He did not identify the company.
Hansen said National had been negotiating with that company and two others to secure a $25 million loan to pay debts and operating costs. National operates on a budget of $20 million a month.
A U.S. Bankruptcy Court judge in Las Vegas had given tentative approval last month to a $112 million financing package that would have included a $2 million letter of credit from the unnamed aircraft leasing company. The credit would serve as collateral in a complicated loan agreement with Foothill Capital Corp., a subsidiary of Wells Fargo Bank.
Shimizu defended the company's recent assurances that it was close to submitting a final plan to emerge from bankruptcy.
"We get to the point where we're just about there and something happens," he said.
Shimizu said the failure to obtain a $2 million letter of credit loomed large because financing deals are intertwined.
Another hearing is scheduled Nov. 15.
The financing setback comes three months after National was denied a federal loan guarantee by the federal Air Transportation Stabilization Board.
National serves Las Vegas, Reno, Seattle, San Francisco, Los Angeles, Dallas, Chicago, New York, Philadelphia, Washington, D.C., Miami and Newark, N.J.
Shimizu said without the additional leased plane, the airline plans to adjust flights and schedules to add seasonal service beginning Nov. 21 to West Palm Beach, Fla., and a third daily flight to Miami.
