Vanguard is done

[corky]

KANSAS CITY, Mo. (AP) -- Vanguard Airlines suspended operations Tuesday, saying it would lay off nearly all its employees and file for Chapter 11 bankruptcy organization.


The Kansas City-based discount carrier has never shown an annual profit in eight years of operation. A recorded announcement on its reservation line early Tuesday said all Tuesday and Wednesday flights had been cancelled and all other flights scheduled after that have been suspended indefinitely.


"The company is seeking funds in order to resume operations," the announcement said. "The company intends to file for protection under Chaprter 11 of the Federal Bankruptcy Code."


On Monday night, calls to Vanguard headquarters were met by a recording saying all circuits were busy. The airline's Web site had still been accepting reservations earlier in the evening, but by 11 p.m. the site was blank except for a link to another carrier, Frontier Airlines.


By early Tuesday, the Website carried a new message: "I'm sorry our booking server is temporarily down! Sorry for the inconvenience!"


Scott Dickson, Vanguard's chairman and CEO, told The Kansas City Star that the failure to secure the financing it needed was forcing the company to plan the Chapter 11 filing.


"This is a sad day for Vanguard, for its employees and for Kansas City," Dickson said. "Today's events hurt people ... We have done everything in our power to avoid today's actions."


Elizabeth Cattell, Vanguard's vice president or marketing and advertising, said nearly 1,100 employees, including about 915 in Kansas City, will be terminated before the Chapter 11 filing. A skeleton crew of about 60 will stay in hopes that additional financing can be obtained.


Cattell said Vanguard had made arrangements for ticket-holders to buy discounted tickets from Frontier and National airlines, and it is talking to other carriers about similar arrangements.


One of the start-up carriers that proliferated nationwide in the 1990s, Vanguard's last quarterly profit was in 1998.


With a fleet of six Boeing 737s and seven MD-80s, Vanguard has specialized in low fares. Its recent schedules listed 17 destinations.

 

[chperplt]

from website

Information for Vanguard Employees
Scott Dickson
Chairman, CEO and President


July 30, 2002
Dear Vanguard Family:

Today is a sad day. At 1 a.m. this morning, Vanguard Airlines suspended operations. Absent receipt of critical funding, we intend to soon file for Chapter 11 protection in the federal bankruptcy court for the western district of Missouri. This very difficult decision was made only after every effort was made to obtain the financing necessary to continue operations. We simply came up dry and ran out of time. The reasons for the cessation of operations and need to file are more particularly set forth in our press release. It is likely that this is a permanent shutdown.

With very limited exceptions, all Vanguard employees have their employment terminated as of 1 a.m. this morning. No bumping rights exist. A limited group of employees who are being contacted individually will have their employment continued for a brief period of time as we seek to obtain financing. Such employees are hired only on a day-to-day basis and may be terminated on notice. The possibility of shutdown has been communicated, and known, for a long time. We were unable to provide specific notice of the actual shutdown earlier, because we have had hope of obtaining financing, and have held discussions with potential lenders, until the very last minute. Any notice provided prior to today would have removed any chance of obtaining financing. Several times in the last year we have been on the verge of shutdown and obtained financing at the last possible moment. This situation was no different, and it was definitely worth our while to try to obtain financing until the last possible moment.

Employees are required to return any airport-issued badges and keys and are requested to return this Thursday or Friday to retrieve their personal belongings. Except in the case of emergency need, you will not be allowed admittance to Vanguard facilities today (Tuesday, July 30th). I regret this inconvenience but the fundamental purpose of Chapter 11 is to provide an orderly process and today all our efforts must be focused on obtaining additional capital to allow the Company to recommence operations. If you have an immediate emergency need for a personal item, please advise a security guard and we may be able to retrieve it for you.

Your management team and I continue to believe that Vanguard held an excellent industry position and had demonstrated the viability of the business strategy. However, the general skepticism of investors towards airlines since September 11, coupled with Vanguard's history of losses, prevented us from obtaining significant new capital. In short, we were doing the right things but past history and timing vis-à-vis September 11th were against us.

Although we will attempt to reorganize in bankruptcy and fly again, I cannot provide you any assurance of this. I am certain you will be able to follow the course of our reorganization efforts in the Kansas City newspapers.

Employee inquiries should be sent by email to [email protected]. You may also contact the Company's General Counsel, Bob Rowen, by phone at 816-243-2995. However, please understand that the Bankruptcy Court will allow the hiring of only a tiny staff to handle the liquidation and that staff will be extremely busy. The staff may have a limited ability to return emails and may not have time to handle phone inquiries.

If you believe Vanguard may not have your current address on file, please leave your current address and contact information with Human Resources, by hand delivery, letter and/or email to [email protected].

During the last year, you worked extremely hard to make Vanguard a success. Our passengers demonstrated their confidence in the airline by purchasing tickets for future transportation. Our shareholders provided as much financial support as they were able given economic conditions over the last 10 months. Many of our suppliers also provided substantial financial concessions, while their payables increased. The shutdown of Vanguard is a tragedy for many. I am deeply sorry that it had to happen.

You have a lot about which to be proud. Despite substantial adversity, we operated a safe airline for over seven years. We brought affordable transportation to Kansas City and the Midwest. You showed tremendous spirit, hard work and determination.

A list of FAQs is being provided separately.

I appreciate the personal friendships I enjoyed with many of you during the last year. I wish you the best in your future career. You will be in our prayers.

Very truly yours,

Scott Dickson

 

[Timebuilder]

Perhaps Frontier can also absorb the pilots and aircraft.

Good luck to you former Vanguard pilots and employees.

 

[TIMP]

"Your management team and I continue to believe that Vanguard held an excellent industry position and had demonstrated the viability of the business strategy. However, the general skepticism of investors towards airlines since September 11, coupled with Vanguard's history of losses, prevented us from obtaining significant new capital. In short, we were doing the right things but past history and timing vis-à-vis September 11th were against us."


Wow!! With delusional comments like that coming from the Boss it's no wonder why they folded. If Vanguard held an excellent position in the industry then it wouldn't have gone bankrupt. If this guy thinks his company defined "excellence" then I wonder how he would rate a well managed company like SW, or any others that remain in business. Admitting ones mistakes and taking responsibility for them is key to success. Something these folks forgot.

Timp

 

[tired_pilot]

people need to start flying

I hope this isnt a sign of the way things are going to go for smaller nationals..but with Midway and now Vanguard I think it is...people NEED to start flying..another reason to cut back on the(TSA) security phasade....obviously theres other factors involved..but we need to stand up and say enough it enough!
AMR's Carty was right a few months ago when he expressed his disapproval of security......my 2 cents

Good look my prayers are with everyone in the industry

 

[njcapt]

"Your management team and I continue to believe that Vanguard held an excellent industry position and had demonstrated the viability of the business strategy. However, the general skepticism of investors towards airlines since September 11, coupled with Vanguard's history of losses, prevented us from obtaining significant new capital. In short, we were doing the right things but past history and timing vis-à-vis September 11th were against us."


Wow!! With delusional comments like that coming from the Boss it's no wonder why they folded. If Vanguard held an excellent position in the industry then it wouldn't have gone bankrupt. If this guy thinks his company defined "excellence" then I wonder how he would rate a well managed company like SW, or any others that remain in business. Admitting ones mistakes and taking responsibility for them is key to success. Something these folks forgot.

Timp

Excuse me, Mr Flight Instructor. You couldn't possibly have any idea whether Vanguard's business plan could have borne fruit or not. I flew for Vanguard for half their life and saw a lot of ridiculous decisions made before Jeff Potter took over in 2000 and Scott Dickson in 2001. They turned what was a confused, aimless airline into a viable, low fare, niche contender. But for the lack of a few million dollars of financing, Vanguard went from an incipient Frontier or AirTran to a footnote in history like WestPac.

The ATSB is preparing to give US Airways up to a BILLION dollars in loan guarantees, but balked in helping a low fare carrier that helped to lower fares in most of our country's fortress hubs for the relative chump change of $13.5 million. That alone is what caused Vanguard to close its doors. During the summer of this year Vanguard had average load factors in excess of the 82% break even point. It was the ATSB's latest denial of guarantees that caused Vanguard's major financiers to pull the plug.

So in closing, Junior, I hope you never have to suffer reading the clueless screeds of people who have never had their livelihood taken from them. I was the last pilot to leave Vanguard before the end, and having experienced the folding of an airline before, will do everything I can to help the friends who were left jobless. There but for the grace of God go I.

 

[CaptBuzzard]

Well, you can never argue with someone who actually knows what went on at Vanguard. It's truly sad. I hate to see good companies go south so fast. One of my good friend's uncle flew for them for five years. He was an MD-80 Captain. It is just too bad that smaller companies are left out to dry up and blow away. That pi$$es me off. The larger companies can get a $billion, but Vanguard couldn't get $13.5 million. Our gov't su(ks at times.

 

[Boeingman]

What is really disgusting is if you consider the Billions and Billions of dollars our government doles out every year to foreign countries, like Isreal for example.

When you look at what we as Americans have to go through to get financing to save a potentially viable company, or money for schools, health care for kids, infrastructure etc. etc, it disgusts me.

It is long overdue we start taking care of our own.

 

[Caveman]

njcapt,

Since when is holding a CFI certificate a derogative slur? I'm sorry you are out of work but your condescending attitude was way out of line.

you wrote:

"The ATSB is preparing to give US Airways up to a BILLION dollars in loan guarantees, but balked in helping a low fare carrier that helped to lower fares in most of our country's fortress hubs for the relative chump change of $13.5 million. That alone is what caused Vanguard to close its doors. During the summer of this year Vanguard had average load factors in excess of the 82% break even point. It was the ATSB's latest denial of guarantees that caused Vanguard's major financiers to pull the plug."

You needed an 82% load factor just to break even?!? Yeah that sounds like good business to me.

So Uncle Sugar wouldn't guarantee a 13.5 million loan is THE ONLY REASON Vanguard had to file for BK? No, 8 years of being in red ink is why Vanguard folded.

Hey I'm all for the little guy making it and I darn sure don't want to see any more pilots out of work. I'll agree that what Vanguard has done recently was better than the first 6 years or so but it was too little too late and bad timing, thanks to 9/11.

So, junior, stop taking out your frustrations on some guy that had nothing to do with your company's demise.

 

[BigFlyr]

What is really disgusting is if you consider the Billions and Billions of dollars our government doles out every year to foreign countries, like Isreal for example.

It is long overdue we start taking care of our own.

I totally agree!

So now its Vanguard... who's next? More pilots on the street... more $$$ for the "Big Boys" to continue losing millions per quarter... but that's OK... we can afford it...

 

[Timebuilder]

While I often question the amount of money we send overseas to some questionable "friends", I strikes me that if Israel were not drawing the attention of the extremist Muslim world, that attention would be almost completly focused on US.

Maybe we can think of it as "insurance."

 

[Fly-By-Cable]

Just an observation...
On Wednsday morning, less then 24 hours form Vangard's announsment, AirTran added Kansas City to it's list of destinations.

 

[falcondriver]

I hope all the best to the pilots. I was laid off for 5 months. I feel your pain and hope you guys and gals get jobs quick.
Good Luck
Falcondriver

 

[CitationCapt]

Any news is better than no news

Read this in the KC Star this morning. Sad to see another pilot (and employee) group out on the streets. Perhaps this news will turn into something positive for them.

CC


Posted on Thu, Aug. 01, 2002

Judge approves Vanguard plan to seek financing
By RANDOLPH HEASTER and DAN MARGOLIES
The Kansas City Star

A federal bankruptcy judge on Wednesday approved Vanguard Airlines Inc.'s request to use about $450,000 over the next eight days in a desperate, last-ditch effort to return the carrier to the air.

About 80 core employees will continue working over the next week to seek financing that could save Vanguard, said Daniel Flanigan, a bankruptcy lawyer representing the Kansas City-based airline.

Also, U.S. Bankruptcy Judge Jerry Venters approved Vanguard's request that it be allowed to pay $150,000 in outstanding payroll checks held by employees before its bankruptcy filing.

Vanguard shut down operations and filed for Chapter 11 bankruptcy on Tuesday, citing assets of $39.7 million and debts of $95.9 million. The carrier laid off about 1,000 employees and left thousands of passengers stranded.

According to its annual filing with the Securities and Exchange Commission for 2001, the airline has accumulated losses of $133 million since beginning operations in December 1994.

Meanwhile, U.S. Sen. Jean Carnahan, a Missouri Democrat, introduced a bill Wednesday that could provide more aid to laid-off Vanguard employees if the airline is permanently grounded.

In a federal bankruptcy court hearing Wednesday, Flanigan said Vanguard had about $1 million in cash. Excluding the $150,000 for payroll checks issued before its bankruptcy filing, Vanguard was granted use of up to $450,000 during the period of trying to obtain new financing.

About $100,000 would be required for the financing efforts, according to Vanguard's pleading. The remainder would be used to pay the 80 employees that have remained with Vanguard.

Under the request, Flanigan said, those 80 employees would receive pay for the week before the bankruptcy filing, which most employees did not receive. In addition, they would be paid their normal salaries through Aug. 9 plus 15 percent.

Flanigan said the 80 employees had lost their health benefits along with the rest of the Vanguard work force.

"That 15 percent is partly to make up for the loss of health benefits, and also to induce them to come to work," said Flanigan, of Polsinelli Shalton & Welte.

Given Vanguard's dire financial condition, with an estimated liquidation value of only $4.2 million to $5.4 million, Flanigan said, using the cash collateral to try to save the airline would be worthwhile.

"The only people we believe that have a protected interest in the cash collateral are the majority owners," he said.

Investor William Hambrecht, J.F. Shea Co. and Pegasus Aviation Inc. own about 80 percent of Vanguard.

By offering prospective investors bankruptcy court protection and the "superpriority" lien status granted to postbankruptcy creditors, Vanguard said, it is "reasonable to hope that a financing source may emerge in time to save the airline."

"During the last year, Vanguard has experienced interest by investors, including investors who were interested in a debtor-in-possession lending scenario," David A. Rescino, Vanguard's chief financial officer, said in a bankruptcy court affidavit filed Wednesday.

"The filing for Chapter 11 in fact simplifies the process and adds certainty to an investor desiring to obtain ownership and control of the airline. Accordingly, the filing itself may stimulate renewed interest by potential investors."

Vanguard said its effort to obtain additional financing probably would not last longer than seven days. If the effort fails, Rescino said, Vanguard will pursue an orderly liquidation, which would spell the airline's formal demise.

In that case, Vanguard's remaining 80 employees would be reduced to 40, then to 12 by the end of August, and then to four by the end of September.

Rescino estimated that a liquidation would yield enough money to pay off secured creditors in full and unsecured creditors in part. Among the assets available for distribution, he said, would be $700,000 to $1 million in prepaid insurance; $1.5 million to $2 million in excise tax refunds on unused tickets; $700,000 to $1 million from the sale of office, computer and other equipment; $100,000 to $200,000 in fuel prepayments; $100,000 from the sale of fuel inventory; and $100,000 in accounts receivable.

Although at this late stage Vanguard's prospects appear dim, at least one local aviation lawyer said the airline's hope of attracting new investors was not entirely unreasonable.

"There's a lot of value in an air carrier certificate, in their leases and in their pilots," said the lawyer, Jim Cooling of Cooling & Herbers. "Whoever comes in and provides financing will be protected by the bankruptcy court, and the airline's debt will be virtually eliminated.

"So I think it's still possible that someone could step up."

But Vanguard executives acknowledge that obtaining new financing is a long shot, and aviation industry analysts have given Vanguard no chance to emerge from bankruptcy.

If Vanguard is grounded permanently, its more than 900 Kansas City area out-of-work employees most likely won't receive severance benefits, given the company's liquidation value.

"That would be up to the bankruptcy court," a Vanguard executive said earlier this week.

Carnahan's bill proposes that airline employees furloughed because of loan guarantee denials by the Air Transportation Stabilization Board be entitled to the same benefits provided to workers displaced by foreign competition.

The U.S. Labor Department's Trade Adjustment Assistance program provides for job search allowances, income support and job retraining assistance. In Carnahan's proposal, airline workers would have to be employed by the same carrier for at least six months of the airline's final year before a layoff or shutdown occurred.

Carnahan and other Missouri and Kansas politicians have criticized the stabilization board, contending that it was created after Sept. 11 to aid airlines in Vanguard's predicament.