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Fledgling Legend Airlines Lives Another Day

By Bill Zeeble, KERA 90.1 reporter

Dallas, TX – Bill Zeeble , KERA 90.1 reporter: Since 1996, Legend?s CEO, T. Allan McArtor, has struggled in courts, the marketplace, and even Congress to get his small, luxury-oriented airline off the ground. He battled American Airlines, lawyers claiming the Wright Amendment restricted his 56-seat jet service, and helped create a feud between Dallas and Fort Worth over his company?s plans. But Legend won its legal fights and, eight months ago, finally flew. Officials say expenses had started falling, while bookings and revenues were rising. But McArtor says an investor unexpectedly pulled the plug, forcing Legend to voluntarily do the same. It grounded its seven DC-9s, then filed for Chapter 11 bankruptcy protection. Since then, the company has struggled to find more investors. After yesterday?s short session in bankruptcy court, McArtor finally got what he called a 'good day.'

T. Allan McArtor, Chief Executive Officer, Legend Airlines: The court has said, ?Stand back, give them a little breathing room, give them a chance to get back in the air. Get off their backs, we?re protected under the bankruptcy code and let Legend have a chance to reorganize and bring service back to Dallas.?

Zeeble: Legend?s bankruptcy attorney Toby Gerber proposed five motions before Judge Robert McGuire and some of the company?s top creditors. All motions were granted without opposition.

Toby Gerber, Attorney for Legend Airlines: We got permission to spend money and keep our doors open and to pay our debts as they come due since filing bankruptcy. And second, it gives us the ability to honor our obligations to employees, to make sure they don?t get stuck with our obligations.

Zeeble: Under agreements with those owed the most money, Legend now can spend $900,000 to keep its lights on and planes in the air, initially as a charter service. It will continue to pay key employees, including their benefits like health insurance. McArtor remains optimistic he?ll raise the money needed to fly regularly scheduled commercial flights again. But it may take at least a month.

McArtor: We have to make sure that we can generate the trust of the public that when we come back to fly, we come back for good. So it?s a several million dollar proposition. But we have a substantial opportunity for private equity as well.

Zeeble: Here?s why. Under Chapter 11 protection, a new investor does not inherit old debt. McArtor says some who expressed interest weeks ago, but who shied away, have called again. But experts warn any involvement in Legend will require a long hard look before sinking big money into it. For one thing, experienced bankruptcy attorneys say details of the reorganization plan aren?t in place yet. And those details could spell success or failure. In addition, Legend?s brand name - usually a selling point - isn?t widely known. Aviation consultant Barbara Byer says that despite McArtor?s claim of having a good business plan, it may not be. Legend pitches first class flights at coach costs.

Barbara Byer, President, Avmark: The number of real successes runs in fractions of a percentage. It?s actually more difficult to offer a more premium service than a discount service. ?Cause the premium flyers normally prefer to fly on scheduled carriers where they have benefits of frequent flyers and any number of activities.

Zeeble: She also cites the presence of fiercely competitive American Airlines. But adds Legend?s business plan could work under the right circumstances.

Byer: I would want a carrier that was serving what I?d call underserved markets.

Zeeble: Is Dallas an underserved market?

Byer: Dallas does not fit [laughter] my, my criteria of an underserved market [hearty laughter].

Zeeble: So Byer holds out little hope for Legend. But McArtor is not giving up. After all, he says he?s fought now for four years and won tough battles to get off the ground. Now he needs what Byer calls a ?Daddy Warbucks? to stay aloft. For KERA 90.1, I?m Bill Zeeble.