Legend Airlines, a start-up that said last week it had lost $1 million a week in its first six months, shut down operations today.
Legend executives decided late Friday to suspend operations until it can raise more capital, according to a statement released today.
Spokeswoman Kim Plaskett said she was not prepared to say how long the suspension would last and what the airline’s prospects for recapitalization were.
Continental Airlines and Continental Express have agreed to honor Legend tickets to all destinations. Customers will fly to Cleveland or Houston before heading to their final stop. Other airlines also may step in to help out, Plaskett said.
From its Dallas hub, Legend serves New York, Washington, Los Angeles and Las Vegas.
Organized in 1996, Legend attempted to challenge Fort Worth-based American Airlines for business travelers in the Dallas-Fort Worth market by offering first-class amenities, such as leather seats and in-flight live television, aboard 56-seat jets.
American and the city of Fort Worth tried to block the airline’s start-up, but Legend won the lengthy court battle and began flying from Dallas Love Field on April 5.
Flying in the Red
Last week, Legend filed documents with the U.S. Department of Transportation that indicated that it lost $25.6 million from its until the end of the third quarter on Sept. 30, and had lost nearly $44.7 million since it was formed in 1996, including expenses for property, equipment and employees.
As of Sept. 30, Legend had $184,522 in cash on hand and had been drawing down by nearly $14,500 a week during the third quarter. At that rate, it would run out of cash the week of Christmas.
Legend President and CEO T. Allan McArtor said last week that the company would be able to raise enough capital to keep going. He said advance ticket sales for the holiday season and early 2001 are “very strong.”
Legend’s investors had about $8 million equity in the company as of Sept. 30.
McArtor contended that Legend had never contemplated becoming profitable by this stage of its development. However, he acknowledged that increased fuel prices has hurt Legend more than larger airlines, and Legend has seen higher-than-expected labor costs for retrofitting its planes.