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All-Vegas Airline to Take Flight in '99

30 July 1998

LAS VEGAS -– Harrah's and Rio have invested in an airline providing flights exclusively to and from Las Vegas, and it'll take to the sky in a matter of months.

National Airlines, a new Las Vegas-based scheduled airline flying an all Boeing 757 aircraft fleet, will begin operations in early 1999, according to Founder and CEO Michael J. Conway. The announcement came as National Airlines completed more than $50 mil1ion in Private Placement Equity Financings, and strategic marketing alliances with leading casino companies Harrah's Entertainment, Inc (NYSE: HET) and Rio Hotel & Casino, Inc. (NYSE: RHC), each of which invested $15 million in the new venture. Affiliates of Wexford Management, LLC have invested $7 million and will be National Airlines' regional airline partner.

In response to a growing need for flights to Las Vegas, Conway, a 25-year veteran of the airline industry has assembled an experienced management team with strong airline backgrounds to launch National Airlines. Beginning in early 1999, National Airlines plans to offer conveniently scheduled nonstop flights between Las Vegas and New York, Miami, Los Angeles and San Francisco. Nine additional routes are expected to be added within the first year of operations. All of National Airlines' flights will bc nonstop to and from its Las Vegas hub.

"National Airlines will provide Las Vegas residents, visitors, and those passengers transiting through our Las Vegas hub with a superior product and service unlike any currently available," Conway said. Today, a significant amount of the service in Las Vegas occurs in the late evening between 10 p.m. and 2 am. We plan to change this."

Management at National Airlines has hopes of establishing a position in a market they believe is not dominated by any of the major carriers. Airlines have reduced capacity in many Las Vegas markets and increased ticket prices, resulting in a decline in Las Vegas airline traffic for the first time since 1984. "None of the other carriers operating in Las Vegas have more than a 20% revenue share of the market," Conway noted. "At the same time, over 11,000 additional daily airline seats will be required to deliver Las Vegas visitors to the 21,000 new hotel rooms being added by the year 2000." (Las Vegas currently has an inventory of 106,000 hotel rooms.)

"Our product will appeal to not only the most price sensitive travelers, but to frequent business travelers and the growing number of upscale Las Vegas visitors being targeted by the existing and new mega-resorts," Conway added.

He also noted that National Airlines plans to launch its operation with a fleet of four Boeing 757s, each configured with 22 first-class seats and 153 coach seats. A typical Boeing 757 aircraft has 190 seats.

"National Airlines will cater to the traveling public's needs through superior amenities, including full interline service, spacious seating in both first class and coach, as well as name brand in-flight meals and much more," he said.

He continued, "We are very excited about our partnership with two of the most visionary and successful companies in the hospitality/gaming industry. Together, we plan to take the Las Vegas visitors' air travel and lodging experience to a whole new level."

"Our investment in National Airlines is a strategic investment in our brand, which will allow us to offer additional valued services and conveniences to our customers," said Philip G. Satre, chairman, president and CEO of Harrah's Entertainment. "Harrab's strategy revolves around relationships with target customers, distribution and unsurpassed service. A strategic alliance and investment with experienced managers operating a well-founded and focused airline based in Las Vegas that serves many of the casino markets where our seven million-plus Total Gold customers live creates a unique opportunity to build upon the total experience that our Harrah's customers desire on a Las Vegas trip. We will be able to offer unique services and benefits that make the combined travel on National Airlines and staying and playing with Harrah's valuable to our current and targeted potential customers."

Jay Barrett, president of Rio Hotel & Casino, said, "Our partnership with National Airlines is a natural. In order for major casino properties in Las Vegas to sustain their growth and viability, it is essential that airline capacity into Las Vegas keep pace with the dramatic growth in room inventory. National Airlines provides the right solution at the right time."

"We are equally excited about our National Airlines investment and the potential to expand our commitment to regional airline service to the West Coast," Charles B. Davidson, chairman of Wexford Management, said. "This alliance provides us wit the opportunity to feed National Airlines' larger Boeing 757 fleet out of its Las Vegas hub with our regional jets currently on order."

The launch of National Airlines comes as Las Vegas continues its rapid growth, with the continued openings of additional new attractions and hotel rooms. Over the next two-and-one-half years, investments of close to $6.5 billion in new capital and almost 21,000 new Las Vegas hotel rooms are anticipated.

"We estimate that approximately 100 new daily, long-haul flights will be required to accommodate the estimated 3.2 million additional air passengers expected to visit Las Vegas over the next several years," said Manuel Cortez, president of the Las Vegas Convention and Visitors' Authority. "This represents a 12% increase over the current average daily flights, making National Airlines' presence here critical to the continued growth and business expansion of Las Vegas."

Michael Conway, National Airlines' president, concluded, "We estimate that our initial operation of four Boeing 757 jets will carry 25,000 visitors to Las Vegas each month. By the end of our first year of operations, we expect to bring more than 75,000 passengers to our new home each month."

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