Vanguard Airlines Reports Second Quarter 2001 Results

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

The Company`s net loss for the three months ended June 30, 2001, was $6.8 million or basic loss per share of $0.33, compared to a net loss of $2.7 million or basic loss per share of $0.16 in the second quarter of 2000. Total operating revenues for the second quarter of 2001 decreased 20 percent to $30.2 million from $37.6 million in the second quarter of 2000. Total operating expenses decreased 11 percent to $35.8 million from $40.1 million in the second quarter of 2000.

Since March 2001, Vanguard has seen year-over-year increases in its monthly load factor. For the second quarter of 2001, load factor increased 10.6 points to 72.1 percent compared to 61.5 percent in the second quarter of 2000. Passenger traffic increased five percent to 284.1 million Revenue Passenger Miles for the second quarter 2001 versus 271.6 million in second quarter 2000. Capacity decreased 11 percent to 393.9 million Available Seat Miles from 441.4 million in the second quarter of 2000.

“The second quarter was a transition period for Vanguard,” said Scott Dickson, Chairman, CEO and President of Vanguard Airlines. “The quarter continued and intensified the reconfiguration of our route system to operate longer-haul flights, saw the airline transition to Sabre as its host reservations system and brought the introduction of MD-80-series aircraft into our fleet. These changes had a significant adverse impact on revenues and expenses during the second quarter. We believe the revenue impact from the Sabre transition was essentially confined to the second quarter, and transition expenses will be minor going forward.”

New Route Structure:
“Since October 2000, Vanguard has reconfigured its route system to operate longer-haul routes,” Dickson said. “Revenues derived from new routes generally build over time. Cost savings derived from longer-haul flying were offset by increased costs of serving higher-costs cities such as Los Angeles, New York-LaGuardia and San Francisco and by the Company`s program of commencing markets with low frequencies.”


Sabre Transition:
“Revenue and expenses were further impacted in the second quarter as a result of the Company`s transition to Sabre as its host reservations system,” Dickson said. “This transition impacted our normal reservation activity resulting in a short-term reduction in sales; required training of all reservations and customer service personnel on the Sabre system resulting in an increase in training and payroll costs; and caused temporary reservations and passenger handling inefficiencies. As of the end of June 2001, the Company`s reservations operations had returned to normal levels. The Sabre system will serve Vanguard well going forward.”

Vanguard`s transition to Sabre was intended, in part, to improve travel agency sales. Tickets sold through travel agencies as a percentage of total sales for Vanguard have increased substantially from May to July 2001. In addition to increasing Vanguard`s market presence, travel agents generally book higher-yielding passengers.

MD-80-Series Aircraft:
“Costs in the second quarter were also affected by our introduction of MD-80 aircraft into the fleet,” Dickson said. “As of August 1, 2001, Vanguard has taken delivery of three MD-80-series aircraft. The Company is returning certain of its 737-200 aircraft to the respective lessors and has committed to lease at least six more MD-80-series aircraft for the balance of 2001. The Company intends to lease additional MD-80-series aircraft in 2002 for both growth and 737 replacement.”

Other key Vanguard events during the quarte:

* Improved on-time performance to above industry averages.
* Commenced service to Las Vegas and San Francisco on April 1, 2001, for a total of 14 destinations.
* Became a participating carrier in the Airlines Reporting Corporation (ARC).
* Named Scott Dickson as President and CEO.
* Introduced SkyBox? Business Class service on its MD-80-series aircraft.
* Introduced new yield management programs late in the quarter.

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, Kansas City, Las Vegas, Los Angeles, Myrtle Beach, 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 11 Boeing 737s and three Boeing MD-80s, which feature SkyBoxä Business Class service. For more information or to make reservations online, visit Vanguard`s Web site at Vanguard Airlines, you`ll like where we`re going.