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"Plan saves Fresno, California based Allegiant Air"
Saturday, May 19, 2001
Plan saves Allegiant Air
Carrier's major creditor seeks to take over the Fresno-based airline.
By Sanford Nax
The Fresno (CA) Bee
One of the founders of the former WestAir Airlines will become majority
owner of financially troubled Allegiant Air under a reorganization plan
submitted to bankruptcy court.
Maurice J. Gallagher is the Fresno-based carrier's largest creditor.
Gallagher owns a jet-leasing company that provided one of the DC-9 jets that
Allegiant uses, and he loaned the carrier $200,000.
Allegiant operates regularly scheduled passenger service between Fresno and
Las Vegas and has a charter service. Gallagher said Friday he will acquire
up to 80% of the reissued stock. The rest will be owned by Mitch Allee, who
is currently sole owner of Allegiant.
The goals are to keep the Fresno-Las Vegas run operating, to expand the
charter operations and to fly the airline out of trouble.
Creditors and the bankruptcy court have to approve the plan. If it is
accepted, Gallagher could assume control of the company this summer.
Gallagher's acquisition of Allegiant would put him back into the airline
industry in Fresno, where he and business partner Timothy Flynn turned
WestAir into one of the largest regional carriers in the country.
Gallagher owned 24% of WestAir when Mesa Air Group purchased it in 1992. Six
years later, WestAir ceased to exist after United Airlines stopped using
Mesa to ferry passengers to its large jets.
But Gallagher and Flynn went on to earn millions after becoming early
investors in ValuJet.
Allegiant has four DC-9 aircraft, but only one is operating. The other three
are due for major maintenance checks, which cost about $350,000 each and
take about 30 days to complete.
In such maintenance checks, the aircraft is stripped and all parts are
inspected and lubricated or replaced. Total cost of maintenance on the three
planes will exceed $1 million. Gallagher said he wants to get all four
aircraft back into the air so Allegiant can generate more charter business.
The original plan was to sell the airline and repay Gallagher and other
creditors. But the airline industry is going through a "down cycle" and no
serious buyers emerged, said Gallagher, who is owed at least $2 million,
according to court records.
" ... All the potential buyers did not demonstrate the financial ability to
complete a purchase," Allegiant's bankruptcy lawyer, Hagop Bedoyan, said in
"We will put up enough money to pay off creditors and put in additional
working capital to expand the fleet up to four," Gallagher added from Las
Vegas, where he heads an investment business.
Gallagher will immediately contribute about $500,000 to pay a claim on the
pension plan and to help pay off unsecured creditors. That's in addition to
the money he will pay to complete the maintenance checks, Bedoyan said.
Many of the ticket holders who were owed money when the bankruptcy petition
was filed have accepted flights when there were unsold seats or have been
reimbursed by credit card companies.
The new plan calls for those with claims remaining to accept either 15 cents
on the dollar or a travel voucher. Creditors cannot collect on those until
the court has approved the reorganization plan.
Allegiant filed for protection from creditors in December in the wake of
skyrocketing fuel costs. It laid off 112 employees and eliminated all routes
except for Fresno to Las Vegas, which is popular.
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