On the brink: Six Flags appeals to staycationers

×

With a protracted legal battle against the city of New Orleans, the closure of its Mexico City park due to swine flu fears, and $4.2 billion in debt, Six Flags would seem to be dealing with insurmountable odds. Yet even in the face of rumors of impending bankruptcy, Six Flags is hanging on like some kind of thrill-seeking front-seat roller-coaster rider.

Even before Hurricane Katrina inflicted $150 million in damage upon Six Flags New Orleans, the park was having trouble making ends meet; following a fight with insurers and lawsuits from the city, the park seems unlikely ever to open again. After Katrina, Six Flags offered New Orleans roughly $14 million in cash and property to get out of its lease; the city refused and, although Six Flags continues to pay its annual $1.4 million rent, the city argues that a shuttered park is bad for local business. An injunction prohibits Six Flags from removing park property, and the company is responsible for keeping trespassers out; a buyout offer is now off the table, and New Orleans seems intent on forcing the company to reopen the park.

As onerous as it is to pay rent on an unused space, the millions that Six Flags is spending on the park represents a small fraction of its problems. Its biggest concern is a looming $287.5 million debt it must pay by August 15. Six Flags has been delisted from the New York Stock Exchange, and is trying to structure a debt-for-equity deal.

But Six Flags is fighting harder than ever to preserve its core business. This summer the chain will debut new attractions at almost all of its parks. It's expanded its operating calendar and is experimenting with broader food options. Most importantly, it's invested roughly $100 million in maintenance to address customer complaints thatit s properties were getting seedy.

But Six Flags's overriding concern -- getting customers into the parks -- is driving ticket discounts on daily admission, and it's selling season passes for the lowest price in 10 years. The move is intended as a bargain-priced alternative to destination parks like Disney World. With 20 properties in the U.S., Mexico, and Canada, the chain's key strength is to offer a solid staycation option, often free of the cost of airlines and hotels.

The strategy paid off last year, when many Six Flags parks saw record attendance. On Memorial Day last month, Great America, the company's most profitable attraction, had 25,000 visitors, more than doubling corporate expectations. Even if the company must declare bankruptcy, CEO Mark Shapiro says its daily operations will not be affected and characterizes a possible reorganization as a "back-of-the-house issue." Still, the company is keeping its seatbelt fastened for more thrills and chills.

See more iconic American companies on the brink.


Increase your money and finance knowledge from home

Behavioral Finance

Why do investors make the decisions that they do?

View Course »

Investing in Emerging Markets

Learn to invest in a globalized world.

View Course »

Add a Comment

*0 / 3000 Character Maximum