NATIONAL AIRLINES: Time running out for defunct carrier
Airline told to find buyer for operating certificate or liquidate
By HUBBLE SMITH
REVIEW-JOURNAL
National Airlines was given a two-week reprieve Thursday to find a buyer for its Federal Aviation Administration operating certificate or convert the company to Chapter 7 bankruptcy liquidation.
The Las Vegas-based airline, which has been in Chapter 11 bankruptcy protection since December 2000, is being pressed by U.S. Trustee Barry Jenkins to be placed in Chapter 7 trusteeship.
"It is our belief that there is not a good reason to stay in Chapter 11. They're not operating, we should be trying to liquidate," Jenkins appealed to Judge Linda Riegle during the hearing at the Lloyd George Federal Courthouse.
"High-priced attorneys are involved and this is a matter that should be handled with a Chapter 7 trustee. It is the role of the Chapter 7 trustee to liquidate the assets. Why shouldn't we take control of this case?"
Riegle seemed to be growing impatient with the airline, too.
When National's attorneys asked for a 30-day extension to complete a deal for the airline's certificate, Riegle said she heard that line at the last hearing, which was in early January.
Instead of the first week in April, as National requested, she set a hearing for March 12.
Riegle also admonished National for its $6 million in expenditures since ceasing operations in early November.
"I wasn't aware of this at all, $6 million in administrative expenses," she said. "I'm concerned they're being paid down because insiders would be responsible for them. I'm not suggesting management has done something wrong, but I was certainly not aware of it."
Tom Salerno, filling in for National's lead attorney, Craig Hansen, who was ill, said $4 million went for transportation taxes, which had to be paid.
Meanwhile, more than $1 million is owed in unpaid medical claims. An official from the U.S. Department of Labor, addressing the court on the phone, said health claims date back to January 2002 through October. He said that was because Great Western, the third-party health benefits administrator for National, had not received payments from the company.
An ex-employee after the court hearing said National had continued deducting insurance premiums from of his pay stubs right up to the very end.
Salerno said National has a letter of intent with Northern Air Cargo, and that a definitive agreement for the sale of the certificate, valued at roughly $15 million, would be completed no later than the end of March.
If there is no sale by then, National would be willing to convert to Chapter 7 liquidation, he said.
Mike Conway, the founder and chief executive officer of National, appeared at the hearing and explained to the judge that the sale of the FAA certificate is a comprehensive process.
It involves keeping on board five key management people who helped start the airline. Along with the FAA operating certificate, the bankrupt airline also has a Department of Transportation Certificate of Public Convenience.
Those documents require that the same people who wrote the airline operating, safety and maintenance manuals remain with the new airline that buys the certificate. Without those experts, the certificate has no value because the new owner would still have to qualify under DOT requirements, Conway said.
"I don't think it's like a fine wine or good cheese," Salerno said of the certificate's value. "It's not going to get better if we leave it on the shelf."
"I think the cheese has been on the shelf too long," Jenkins responded.
Airline told to find buyer for operating certificate or liquidate
By HUBBLE SMITH
REVIEW-JOURNAL
National Airlines was given a two-week reprieve Thursday to find a buyer for its Federal Aviation Administration operating certificate or convert the company to Chapter 7 bankruptcy liquidation.
The Las Vegas-based airline, which has been in Chapter 11 bankruptcy protection since December 2000, is being pressed by U.S. Trustee Barry Jenkins to be placed in Chapter 7 trusteeship.
"It is our belief that there is not a good reason to stay in Chapter 11. They're not operating, we should be trying to liquidate," Jenkins appealed to Judge Linda Riegle during the hearing at the Lloyd George Federal Courthouse.
"High-priced attorneys are involved and this is a matter that should be handled with a Chapter 7 trustee. It is the role of the Chapter 7 trustee to liquidate the assets. Why shouldn't we take control of this case?"
Riegle seemed to be growing impatient with the airline, too.
When National's attorneys asked for a 30-day extension to complete a deal for the airline's certificate, Riegle said she heard that line at the last hearing, which was in early January.
Instead of the first week in April, as National requested, she set a hearing for March 12.
Riegle also admonished National for its $6 million in expenditures since ceasing operations in early November.
"I wasn't aware of this at all, $6 million in administrative expenses," she said. "I'm concerned they're being paid down because insiders would be responsible for them. I'm not suggesting management has done something wrong, but I was certainly not aware of it."
Tom Salerno, filling in for National's lead attorney, Craig Hansen, who was ill, said $4 million went for transportation taxes, which had to be paid.
Meanwhile, more than $1 million is owed in unpaid medical claims. An official from the U.S. Department of Labor, addressing the court on the phone, said health claims date back to January 2002 through October. He said that was because Great Western, the third-party health benefits administrator for National, had not received payments from the company.
An ex-employee after the court hearing said National had continued deducting insurance premiums from of his pay stubs right up to the very end.
Salerno said National has a letter of intent with Northern Air Cargo, and that a definitive agreement for the sale of the certificate, valued at roughly $15 million, would be completed no later than the end of March.
If there is no sale by then, National would be willing to convert to Chapter 7 liquidation, he said.
Mike Conway, the founder and chief executive officer of National, appeared at the hearing and explained to the judge that the sale of the FAA certificate is a comprehensive process.
It involves keeping on board five key management people who helped start the airline. Along with the FAA operating certificate, the bankrupt airline also has a Department of Transportation Certificate of Public Convenience.
Those documents require that the same people who wrote the airline operating, safety and maintenance manuals remain with the new airline that buys the certificate. Without those experts, the certificate has no value because the new owner would still have to qualify under DOT requirements, Conway said.
"I don't think it's like a fine wine or good cheese," Salerno said of the certificate's value. "It's not going to get better if we leave it on the shelf."
"I think the cheese has been on the shelf too long," Jenkins responded.
