Airline Sees Hope in Bankruptcy

With little hope for returning to the air, ailing discount carrier Vanguard Airlines Inc.’s decision to reorganize rather than sell everything off has left a nagging question: Why?

After all, the company, which bled money year after year, failed to get the funding it needed in nearly a year of begging the government and private lenders for help.

Industry experts and company executives say last week’s Chapter 11 filing leaves open the possibility that an investor might take a chance on the long-struggling carrier. But the prospects seem dim for Vanguard, which laid off nearly 90% of its employees when it shut down. Los Angeles was one of the 18 cities it served.

“Nobody credible is going to give them money now,” said Darryl Jenkins, director of George Washington University’s Aviation Institute.

Even Scott Dickson, Vanguard’s president and chief executive, offered little hope in a letter to employees posted on the company’s Web site.

“It is likely this is a permanent shutdown,” he wrote.

What Vanguard hopes is that the bankruptcy will attract a lender, said Elizabeth Cattell, the airline’s vice president of marketing.

“Sometimes in Chapter 11, we’re looking for a debtor-in-possession lender who would come in, and sometimes it’s more attractive to lenders once you’re in [Chapter] 11,” Cattell said.

Vanguard has given itself a week to find an investor. Without one, the fire sale begins.

On Wednesday--a day after the bankruptcy reorganization filing--a judge approved the airline’s request to use about $450,000 over the next week to seek new financing.

Vanguard’s shutdown came after a private equity arrangement fell through and the federal Air Transportation Stabilization Board rejected a final request for a loan guarantee.

The airline industry has been under immense financial pressure because of last year’s terrorist attacks and the economic downturn, but Vanguard has always had financial difficulties.

The Kansas City-based carrier has not reported a yearly profit since operations began in December 1994. Its last quarterly profit was in 1999.