Vanguard Airlines Reports First-Ever Annual And Fourth Quarter Operating Profits

Kansas City, MO—Vanguard Airlines, Inc. (“Vanguard” or the “Company”) (OTC:VNGD) announced fourth-quarter and year-end 1998 results today.


Operating profit for the year ended December 31, 1998 was approximately $1.5 million compared to an operating loss for the year ended December 31, 1997 of approximately $25.4 million. Operating profit for the fourth quarter of 1998 was approximately $0.1 million compared to an operating loss of approximately $5.6 million in the fourth quarter of 1997.


Net loss for the year ended December 31, 1998 was approximately $1.5 million compared to a net loss for the year ended December 31, 1997 of approximately $28.2 million. Net loss for the fourth quarter of 1998 was approximately $0.6 million compared to a net loss of approximately $6.6 million in the fourth quarter of 1997. The 1998 and fourth quarter of 1998 net losses include non-operating expenses related to deferred debt issuance costs and interest expense of approximately $3.1 million and $0.8 million, respectively. Net loss per share for the year ended December 31, 1998 was approximately $0.02 compared to a net loss per share of approximately $1.85 for the year ended December 31, 1997.


Total operating revenue for the year ended December 31, 1998 increased 28% to $104.3 million compared to $81.4 million for the year ended December 31, 1997. Total operating revenue for the fourth quarter of 1998 increased 34% to $25.4 million compared to $18.9 million in the fourth quarter of 1997. Total operating expenses for the year ended December 31, 1998 decreased 4% to $102.8 million compared to $106.8 million for the year ended December 31, 1997. Total operating expenses for the fourth quarter of 1998 increased 3% to $25.3 million compared to $24.5 million in the fourth quarter of 1997.


Robert J. “Rocky” Spane, President and CEO of Vanguard Airlines, said, “I am obviously delighted with the progress Vanguard Airlines has made over the last 12 months, none of which could have been accomplished without the hard work and dedication of each and every Vanguard employee, many of whom have been with the airline since it commenced operations in December 1994.

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Their efforts are clearly seen on both sides of the profitability equation as Vanguard turned a $25.4 million operating loss in 1997 to a $1.5 million operating profit in 1998. It was, therefore, with great pleasure that we were able to pay our first-ever performance bonus to our employees last December, as well as initiate a matching component in the Company`s 401(k) program.


Key contributing factors to Vanguard`s vastly improved revenue performance, which saw passenger yields increase 40% and load factor increase eight points year-over-year, were the installation of a state-of-the-art revenue management system, a revamped pricing philosophy, a restructured and stable route network, and a new advertising and distribution strategy. Furthermore, various projects were initiated to emphasize customer service and Midwestern hospitality across the whole Company in an effort to attract higher-yielding passengers.


In spite of considerably enhancing the Company`s maintenance infrastructure, expenses decreased because of realizing lower fuel costs, implementing a more efficient route structure, changing the advertising approach, bringing the reservations function and Kansas City station operations in-house, reducing insurance premiums (while increasing coverage limits) and cutting administrative overhead.


With an improving balance sheet, Vanguard recently signed leases with General Electric Capital Aviation Services (GECAS) for two additional Boeing 737-200 Advanced aircraft, one of which has been delivered, with the other due to arrive next month. Furthermore, letters of intent have been signed for three more Boeing 737-200 Advanced aircraft, which will replace aircraft whose leases expire in 1999, and active negotiations are on-going for another two aircraft. By the end of 1999, Vanguard expects to have a fleet of 13 Boeing 737-200 Advanced Stage 3-compliant aircraft.


The two GECAS aircraft will enable the company to increase service between Kansas City and Denver on March 15 to six daily flights and between Minneapolis/St. Paul and Chicago-Midway on April 15 also to six daily flights. Furthermore, Vanguard commences service between Cincinnati and Chicago-Midway on April 15 with four daily flights as the Company builds on its strategy of targeting heavily populated, short-haul, high-fare, relatively uncompetitive markets.


We remain optimistic about the prospects for Vanguard Airlines going forward. We believe that there are still a significant number of niche opportunities to explore and that we have created the platform on which the Company can grow with confidence. We feel that our strategy is working and that the financial performance of the Company will continue to improve as the economies of having a larger fleet become evident.”


Vanguard Airlines, 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 nine cities: Atlanta, Chicago-Midway, Cincinnati (effective April 15, 1999), Dallas/Ft. Worth, Denver, Kansas City, Minneapolis/St. Paul, Myrtle Beach and Pittsburgh. The Company employs approximately 800 full-time equivalent employees and currently operates a fleet of ten Boeing 737-200`s. One additional Boeing 737-200 is scheduled to arrive in March 1999 and the Company has signed letters of intent for three additional aircraft.


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. The Company`s actual results may differ significantly from those currently anticipated. Factors that may cause such differences include, but are not limited to, general economic conditions, the cost of jet fuel, the Company`s ability to secure additional financing, the occurrence of events involving other low-fare carriers, potential changes in government regulation of airlines or aircraft, aircraft availability and delivery issues, and actions taken by other airlines, particularly with respect to scheduling and pricing in the Company`s current or future routes.


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