A Las Vegas court has decided to issue a restraining order to prevent a bankrupt low-cost air carrier's major investor from withdrawing a $16 million letter of credit (L/C).

The decision wins a stay of execution for National Airlines, which remains under Chapter 11-bankruptcy protection. The airline is currently being targeted by Lowestfare.com chairman, Carl Ichan, who is in negotiation with National and says he would invest up to US$400 million to finance or buy an airline that could provide low-cost flights through his distribution channels.

Business survival

If National's major investor, Harrah's Entertainment Inc., had withdrawn its L/C, the proceeds of tickets sold on credit cards would have gone towards repaying whatever amount is drawn down on the Harrah's credit line. This would have forced the airline to cease trading.

The court ordered Harrah's to extend its L/C financing for a period of 10 days. A National spokesman indicated that provided the airline is able to demonstrate it is negotiating a rescue package, the court might well order a further restraining order for Harrah's to grant a further extension.

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