BRENDAN SOBIE / WASHINGTON DC
Among a raft of requests from small and low-cost carriers, Vanguard and National look to have the toughest task
The US Air Transportation Stabilization Board (ATSB) is reviewing more than a dozen applications from US airlines seeking over $3.5 billion in government loan guarantees. Several small carriers filed applications just before the 28 June deadline. These included Aloha Airlines, Frontier Airlines, Great Plains Airways and World Airways.
Frontier's $70 million application came as a surprise given the low-fare carrier's continued profitability. The airline blames a push by higher-cost rivals, particularly United Airlines, to drop fares below break-even levels that can only be sustained through loan guarantees.
Two other low-fare carriers, Spirit Airlines and American Trans Air, have also applied for guarantees despite eking out first quarter profits, also citing rivals' fare cuts.
Aloha, Great Plains and World may have a tough time proving to the ATSB that their business plans are viable. Oklahoma-based Great Plains has not been profitable since launching operations with two Fairchild Dornier 328JETs in April last year. But chief executive Jack Knight says the carrier never expected to start turning profits until it added aircraft, which it has been unable to afford to do.
Aloha is seeking a $45 million loan to offset its loss-making inter-island operation. The carrier has since shifted its focus to mainland services, but needs a loan to support the move.
World chief executive Hollis Harris wants a $30 million loan and is hoping its military charter business, which accounts for over half of the carrier's revenues, will help its cause. "We need a loan just to operate the business," Harris says. Evergreen International Airlines is also pinning its application on its military charter business.
Vanguard Airlines and National Airlines may have the toughest task. Floundering Vanguard has reapplied for a $40 million loan, after the ATSB rejected its initial application. National needs approval for its $60 million application in order to get out of bankruptcy protection.
United Airlines and US Airways, the only majors with pending applications, must reduce labour costs to secure guarantees. US Airways has reached agreement with its flight attendants, reducing annual costs by $77 million. But talks with its pilots have broken off and negotiations with other unions are proceeding slowly.
Source: Flight International