Kansas City, MO—Vanguard Airlines today announced a new investment of up to $7.5 million by existing shareholders of the carrier. They are The Hambrecht 1980 Revocable Trust, J. F. Shea Co., Inc. and Vanguard Acquisition Company. The Hambrecht and Shea entities are two long-standing investors in the company, and Vanguard Acquisition Company became an investor earlier this year. Closing of the investment is subject to certain conditions, including approval by the Board of Directors.

Under the signed term sheet, Vanguard Acquisition Company, investors to be arranged by it and The Hambrecht 1980 Revocable Trust and J. F. Shea Co., Inc. have agreed, subject to conditions, to purchase up to 37,500,000 shares of the Company`s common stock for an aggregate purchase price of $7,500,000, or $0.20 per share of common stock. Conditions to closing include approval by Vanguard Acquisition Company of the Company`s budget. Up to $3.5 million may be advanced prior to closing; funds so advanced prior to closing are made as loans callable on demand by the investors.

It was also announced today that Scott Dickson has joined Vanguard as President, replacing Jeff Potter, who resigned to be closer to his family in Denver, CO.

“I leave with tremendous reluctance,” Potter said. “I feel a great affection for the employees of Vanguard and am confident in their ability to complete the turnaround and positioning of the airline for success.”

Dickson joins the airline from Grupo TACA, where he was Vice President of Planning & Revenue Management since 1998. TACA is headquartered in San Salvador, El Salvador, and is one of the largest and fastest growing airlines in Latin America. Under his management, TACA experienced a 12-point improvement in load factor, a 15-to-20-point improvement in on-time performance, a 100 percent improvement in revenue and a 20 percent improvement in revenue per available seat mile. Dickson previously served in various capacities with Sabre Inc. and American Airlines.

“The management and employees of Vanguard have the ability, talent and spirit to carry forward with the New Vanguard,” Dickson said. “Jeff Potter, the management and the employees have accomplished amazing things for this airline during the past year and particularly since January, when they essentially `remade` the airline. We will move forward with the strategic plan that has been put in place.
“This new investment demonstrates the confidence the investors have in the strategic plan and the ability of our employees to continue building the New Vanguard,” Dickson said.

Under the strategic plan, Vanguard has:

* Begun a fleet renewal program, replacing Boeing 737s with younger, more fuel efficient and longer-range Boeing MD-80s.
* Adopted a reconfigured interior in the MD-80s, providing a first class cabin and increased legroom in coach.

* Joined the Sabre Computer Reservations System, dramatically increasing the ability of its customers to book tickets easily and enhancing travel agency capabilities when booking Vanguard.

* Focused the route system entirely on Kansas City, providing additional non-stop service to seven more cities.

* Steadily improved operational performance.
* Achieved load factors in March and April in excess of 70 percent.
Kansas City-based Vanguard Airlines, which began service in December 1994, is a value-priced passenger airline. The airline provides convenient all-jet service to 14 cities: 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 Company has approximately 950 full-time employees and currently operates a fleet of two Boeing MD-80s and 12 Boeing 737s. For more information, visit the Company`s Web site at www.flyvanguard.com.

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