Kansas City, MO—Vanguard Airlines, Inc. (NasdaqSC: VNGD) today announced third quarter results.

The Company’s net loss for the three months ended September 30, 2001, was $3.6 million or a basic loss per share of $0.09, compared to a net loss of $4.7 million or a basic loss per share of $0.27 in the third quarter 2000. Total operating revenues for the third quarter 2001 decreased eight percent to $32.8 million from $35.5 million in third quarter 2000. Total operating expenses decreased seven percent to $37.2 million from $39.8 million in third quarter 2000. Vanguard’s net loss includes a $2.3 million benefit from $4.6 million of federal assistance provided during the third quarter to offset direct and indirect losses resulting from the events of September 11.

For the third quarter of 2001, load factor increased 8.0 points to 67.0 percent compared to 59.0 percent in the third quarter of 2000. Passenger traffic increased 17 percent to 290.6 million Revenue Passenger Miles versus 248.5 million in third quarter 2000. Capacity increased three percent to 433.6 million Available Seat Miles from 421.4 million in the third quarter of 2000.

Scott Dickson, Chairman, CEO and President of Vanguard Airlines, said, “Considering the disruption caused by the events of September 11, we are very pleased with these results. In particular, we are gratified to see the validation of our business plan with the tremendous growth in Vanguard’s load factor year-over-year and the increase in Vanguard’s yields during the course of 2001. Year-over-year, Vanguard’s yields have been impacted by the change in route structure completed in March of this year and the resulting substantial increase in average length of flight. However, despite industry-wide fare discounting and the events of September 11, between the second and third quarters of 2001, Vanguard’s yields actually increased approximately six percent.

“While the results are very encouraging, they do not eliminate the need for the airline to take strong action to preserve its financial condition as a result of the September 11 terrorist attacks. Our capital resources remain tight. We are discussing financing alternatives with several lenders and seek to utilize the federal loan assistance authorized by recent federal legislation. The federal loan assistance is intended to allow airlines such as Vanguard to regain access to the capital markets after the events of September 11.

“One of the factors that the Government will consider in reviewing applications for loan assistance is the extent of self-help an airline undertakes in order to improve its financial position. Vanguard is actively considering several self-help measures to improve its financial condition, including the restructuring of aircraft leases and vendor payables. We also anticipate the issuance of shares of new equity in connection with a government-assisted financing package, and such issuance may dilute the interests of existing stockholders. To free up equity for issuance, we are considering a stock combination, although the ratio for such split has not been finally determined. We do not have any significant long-term debt (other than deferral notes related to our aircraft leases), so further restructuring indebtedness is not necessary.

“It is management’s hope and firm intention that these measures can be implemented by agreements with creditors, lessors and shareholders outside of any court process with the expectation that this would result in a speedier, less burdensome result for all stakeholders,” added Dickson. “The events of September 11 have sent shockwaves throughout the country and the airline industry. At Vanguard, we intend to survive these events; however, survival will require cooperation by our employees, vendors and shareholders, pulling together to overcome this tragedy. We are guardedly optimistic about Vanguard’s prospects for obtaining new financing involving the federal credit assistance. We have received strong indications of interest from several potential investors and are working to develop a loan and restructuring package for submission to the Air Transportation Stabilization Board.

“If and when received, this new financing, combined with the anticipated restructuring, will put Vanguard on a sturdy financial base from which it can grow its Kansas City operations. Coupled with our successful restructuring of Vanguard’s business strategy, distribution methods and service performance completed earlier this year, Vanguard will be soundly positioned for the new economy. We are very pleased with the current level of Vanguard’s bookings and the rapidity with which our customers have returned to fly Vanguard.”

Separately, the Company stated that it had received notification from NASDAQ that the Company’s shares were subject to delisting as a result of the Company failing to meet NASDAQ’s minimum capitalization requirements. The Company anticipates that, upon delisting, its common stock would continue to trade in the over-the-counter market.

Vanguard Airlines, Kansas City’s Hometown Airline, provides convenient all-jet service to 14 cities nationwide: Atlanta, Austin, Buffalo/Niagara Falls, Chicago-Midway, Dallas/Ft. Worth, Denver, Fort Lauderdale (beginning Dec. 10), Kansas City, Las Vegas, Los Angeles, New Orleans, New York-LaGuardia, Pittsburgh and San Francisco. The airline offers low fares with no advance-purchase requirements, advanced seat assignment and extra legroom on all flights with a fleet of eight Boeing 737s and five Boeing MD-80-series aircraft, which feature SkyBoxä Business Class service. For more information or to make reservations online, visit Vanguard’s Web site at www.flyvanguard.com.

——-