Federal panel denies airline loan requests

By Jeannine Aversa
Associated Press

WASHINGTON — As Hawai'i's Aloha Airlines waits to see whether it's application for a federally guaranteed loan is approved, a federal panel last week refused to approve such guarantees for Spirit Airlines Inc. and National Airlines Inc.

Citing concerns the carriers wouldn't be able to repay the government, the Air Transportation Stabilization Board said it rejected Spirit's request for a federal loan guarantee of $54 million on a loan of $60 million. The board also turned down National, which was seeking a $50.5 million federal loan guarantee on a $60 million loan.

The board was established by Congress last year to oversee a $10 billion loan program, part of a post-Sept. 11 airline industry bailout.

In the case of Spirit, the application was rejected in a 2-1 vote, with Kirk K. Van Tine, the Transportation Department's general counsel, dissenting. The vote to deny National's request was unanimous.

Spirit is a privately held airline based in Fort Lauderdale, Fla. and serves 15 markets, including Los Angeles, New York and Chicago. Spirit's chief executive Jacob Schorr, in a statement, said "while we are disappointed in the ATSB's decision, we are very confident in the viability of our company and the business plan that we have developed to carry us forward."

The board wrote Schorr, saying that "after reviewing the analysis of the board's staff and outside experts regarding the credit rating and the risk and viability of the business plan, the board determined that Spirit's proposal does not provide a reasonable assurance that Spirit will be able to repay the loan."

Las Vegas-based National serves about 10 cities. President Michael Conway said he was "absolutely appalled" by the board's decision and said the carrier would continue to operate its normal flight schedule while exploring other alternatives to shore up the company.

In a letter to Conway, the board said National's proposal "does not provide a reasonable assurance that National will be able to repay the loan," a key consideration in the approval process. The board also said National's "business plan poses an unacceptable risk to the federal government."