Vanguard Airlines Reports Sixth Consecutive Quarter Of Operating Profits

Kansas City, MO—Vanguard Airlines, Inc. (“Vanguard” or the “Company”) (Nasdaq: VNGD) announced third quarter results today.


The Company`s net income in the third quarter of 1999 was approximately $0.2 million, or basic earnings per share of $0.01 and diluted earnings per share of $0.01, compared to a net income of approximately $3.4 million, or basic earnings per share of $0.22 and diluted earnings per share of $0.18, in the third quarter of 1998. The Company`s net income in the first nine months of 1999 was approximately $2.2 million, or basic earnings per share of $0.13 and diluted earnings per share of $0.11, compared to a net loss of approximately $0.9 million, or basic and diluted loss per share of $0.08, in the first nine months of 1998.


Robert J. “Rocky” Spane, CEO and President of Vanguard Airlines, said, “Although our third quarter results were not what we had hoped for, particularly after our strong performance in the first half of 1999, we believe that after accounting for all extenuating factors, the progress Vanguard has made in the last two years remains encouraging. Overall, it is difficult to compare our results in the third quarter of 1999 with our record results in the third quarter of 1998 because of the direct benefits we received from last year`s Northwest strike. However, based on advance bookings for the fourth quarter, we are optimistic that, on approximately 20% more in annual revenues and capacity, our net earnings for the full-year of 1999 will exceed 1998 year-end results.


Having already added two Boeing 737-200 aircraft in the first half of 1999, Vanguard continued with its growth plan in the third quarter with the delivery of two additional aircraft, which resulted in a 38% increase in capacity from the third quarter of 1998 to the third quarter of 1999. Due to this significant amount of growth and the effects of the Northwest strike, we expected a degree of yield erosion in the third quarter, offset by a decline in unit costs due mainly to economies of scale. Vanguard`s unit costs have decreased 8.8%, from 10.5¢ in the third quarter of 1998 to 9.6¢ in the third quarter of 1999, even with various non-recurring charges.


In the third quarter of 1999, Vanguard was negatively impacted by higher fuel prices, the late delivery and integration of two aircraft, the unscheduled removal of four engines and costs associated with the return of four aircraft. The non-recurring charges that resulted from these problems were in excess of $1.3 million for the reaccommodation of passengers on other airlines, the short-term lease of spare aircraft and engines, and the unscheduled overhaul of the removed engines. On the revenue side, above and beyond the effects of the Northwest strike, in late August and September Vanguard witnessed a decline in bookings and yields as a result of increases in capacity and the lowering of fares by our competitors in the markets we serve.

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Our fleet growth plans have recently become firmer as an increasing number of newer used Boeing 737-200 aircraft have become available. During the year, Vanguard took delivery of four aircraft, with one more due shortly, but has returned one to its lessor, and will return two more by year-end. Negotiations to replace these two aircraft, and another whose lease expires in January 2000, are on-going. We anticipate that a deal will be struck whereby we will end 1999 with 13 Stage III-compliant Boeing 737-200 aircraft, up from eight at the end of 1998. We expect to reach 18 aircraft by the end of 2000 and intend to stay focused on our niche of serving high density, high fare, short-haul markets.”


Vanguard, which began service in December 1994 and is headquartered in Kansas City, is a low-fare, passenger airline providing convenient, scheduled jet service. Vanguard serves the following ten cities: Atlanta, Buffalo/Niagara Falls, Chicago-Midway, Cincinnati, Dallas/Ft. Worth, Denver, Kansas City, Minneapolis/St. Paul, Myrtle Beach and Pittsburgh. The Company employs approximately 900 full-time equivalent employees and currently operates a fleet of thirteen Boeing 737-200`s. Vanguard reported its first-ever annual operating profit in 1998 and its sixth consecutive quarter of operating profits in the third quarter of 1999. For more information on Vanguard, please visit our web site at www.flyvanguard.com


This press release contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements are made based on management`s belief, as well as assumptions made by, and information currently available to, management pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Further information on such risks and uncertainties that could affect the Company`s financial results are included in the Company`s filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 1998 and in subsequent filings filed with the Securities and Exchange Commission.


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