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Aviation History
2001
2001 - 0115.PDF
Cash lifelines for ailing US pair Legend and Vanguard RAMON LOPEZ/WASHINGTON DC US BUSINESS carrier Legend Airlines, which ceased flying in December, plans to resume operations this month after receiv ing a $20 million cash injection from new investors. Another strug gling US carrier, low fares special ist Vanguard Airlines, has also received a cash boost, including $7 million from aircraft lessor Pegasus Aviation. New York-based Legend Fund ing Group will invest $20 million in the Dallas Love Field-based air line as long as a federal bankruptcy court protects the cash from credi tors, giving it a 3 5 % stake in the carrier. Staff will own 21 % with the rest controlled by creditors. John Pincavage, who assembled the investor group, says the airline's new strategy will be in place by April, by which point Legend should be breaking even again. He adds that Legend will retain its all- business class product, and insists "there is a place for this type of ser vice" in the US market. Legend aims to resume opera tions later this month, with flights to Washington Dulles and New York LaGuardia. Services to Los Angeles and Las Vegas remain sus pended, but those to San Jose should resume by mid-year. Legend's seven 56-seat Mc Donnell Douglas DC-9-30s remain airworthy, having been used for charter work during the shutdown, which the airline blamed on a cash-flow crisis stem ming from the accumulated effects of high fuel prices, high start-up costs and legal fees associated with Vanguard's Boeing 131s are to be joined by MD-SOs its protracted battle to launch from Love Field. Meanwhile,Vanguard, which has struggled since its launch in 1994, has received a cash injection totalling $ 14.5 million - $7 million from Pegasus and $7.5 from two private investors who retain con trol of the Kansas City, Missouri- based carrier. The Pegasus cash includes $3 million for the purchase of pre ferred stock, giving it an 8% stake, with affiliate International Aero Components providing $3 million secured against present aircraft spare parts, plus an additional $1 million for future parts purchases. The investment is part of a strate gic deal which will see Vanguard take six Boeing MD-80s (and options on two more) from the lessor, plus two spare Pratt & Whitney JT8D-219 powerplants. The MD-80s will complement Vanguard's 13-strong Boeing 737 fleet, providing "the optimal inter im solution" for improved reliabil ity and growth, says the airline's new president and chief executive Jeff Potter. The 7 3 7s will be retain ed until the end of this year at least. Vanguard took a $4.7 million net loss in the third quarter of last year, blaming stiff competition from Southwest Airlines and high oper ating costs. • Ukraine International gets European cash IN ITS first investment in a CIS airline, the European Bank of Reconstruction and Development (EBRD) has agreed to inject €6.5 million ($6.1 million) into Ukraine International Airlines, giving it a 9.9% stake in a carrier that ranks as the country's second largest in terms of passenger boardings. EBRD bought the shares from the Ukraine State Property Fund. The cash has already been injected into the airline. Shareholders inc lude SAirGroup and Austrian Airlines (a combined 25%) and debis AirFinance Ireland (7%). The balance remains in Ukrainian control via the state property fund. • A court in Irkutsk, Russia, has approved a move to pass control of the bankrupt but still operating Baikal Avia to a committee of cred itors, terming the deal "peaceful". The committee will manage the airline's limited operations while seeking potential buyers. J NEWS IN BRIEF • INDIA TAX CAP The Indian Government has agreed to cap aviation turbine fuel sales tax at 4% in order to encourage services to remote areas of the country. The tax currently varies between states from zero to 36%, limit ing commuter and air taxi operations. A bill imposing the tax cap will now go before parliament. Milan airports compromise approved by EC, attacked by Alitalia ANDY NATIVI/GENOA THE EUROPEAN Com mission (EC) has approved an Italian Government proposal aimed at assuaging airline griev ances over the distribution of slots and flights between the two Milan airports, Malpensa - which opened in 1999-and Linate. The EC rilling, which could end a four year Jegal row over the forced transfer of traffic from Linate to Malpensa, endorses a plan increasing the number of available slots at the two airports from 83 to 88 per hour. Malpensa, unpopular with foreign carriers, will remain at 70 slots an hour, but Linate - preferred because it is closer to Milan city centre - sees its allocation rise to 18 per hour. The increase will allow for the launch of new routes linking Linate with Helsinki, Copenhagen and Vienna, and a second daily flight to Frankfurt. Some of the 12 European airlines involved in a legal action against Rome over the Malpensa transfer are not satisfied with the compromise, although with a filing at the European Court of Justice their sole recourse, they may have to accept it. The EC decision is bad news for Alitalia, which fears that an increase in flights from Linate could damage the competitiveness of its Malpensa hub, compromis ing a new strategic plan already under fire from some quarters. The flag-carrier's chief executive Domenico Cempella criticised the Milan compromise, which has prompted speculation that he could resign over the issue. Complicating Cempella's future is the fact that the Italian Treasury Ministry has taken charge of the 53% stake in Alitalia - worth around L3,000 billion ($1.5 bil lion) - previously controlled by state holding company IRI. State-owned SEA, which runs the two Milan airports, says the EC's decision clears the way for programmes including a new cargo centre and maintenance hangars, with L200 billion to be invested this year alone. • FLIGHT INTERNATIONAL 9 - 15 January 2001 21
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