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WASHINGTON, March 31 (Reuters) - The independent auditors for the low-fare carrier Vanguard Airlines Inc. VNGD , in a Securities & Exchange Commission filing made on Friday, said operating losses and a working capital deficiency raised doubts about whether the airline can continue to operate.

Because of its losses and lack of funds, "the company has been dependent upon financing from principal stockholders," according to a report by the airline's auditors, Ernst & Young LLC, Vanguard said in its annual report, referencing the auditor's report.

The Kansas City, Mo.-based airline posted $5.1 million in net losses last year, compared to $1.5 million in losses in 1998. It had cash and cash equivalents of $6.4 million at year-end, according to the filing.

"The report further states that there can be no assurance as to the availability of further financing and that there is substantial doubt about the company's ability to continue as a going concern," Vanguard said again referencing the auditor's report.

Still, the company said it expects its will generate enough cash to support its operations through the second quarter of 2000.

Vanguard had accumulated a deficit of $76.3 million as of Dec. 31, 1999 and its liabilities exceeded current assets by $14.7 million, the annual report said.

"The company is exploring options to raise additional capital to fund anticipated expansion of operations," the annual report said. The airline also said there was no assurance that it would succeed in expanding operations or raising additional capital for that purpose.

Two of Vanguard's principal shareholders, who were not identified, have committed to investing up to $7.5 million if needed to fund the airline's continued operations.

The airline serves nine airports with 86 weekday flights serving Kansas City, Atlanta, Buffalo, Chicago, Dallas/Fort Worth, Denver, Minneapolis, Pittsburgh and Myrtle Beach, S.C.

It recently canceled service between Cincinnati and Chicago's Midway airport because of poor performance.