Judge approves bankruptcy sale for Ravn

  • People prepare to get on a Ravn Connect airplane at the airport in Bethel for a flight to Toksook Bay in this file photo. (Photo/Mark Thiessen/AP)

An auction after the July 4 holiday may decide the future of Ravn Air Group, Alaska’s largest rural airline.

Ravn filed for bankruptcy protection in April, and on Thursday, a Delaware bankruptcy judge approved a plan for selling the company in whole or in part to satisfy creditors.

A specific date for the auction has not been set. It is expected to take place after July 4 but before a July 9 court hearing scheduled to finalize the sale. A Ravn attorney said he was not allowed to talk to the media about the case.

It isn’t yet known who will bid on the airline, but in a written statement Thursday, Ravn Air said that “approximately 30 bidders expressed interest in buying all or some of the air group’s assets. Of these, five strategic buyers submitted bids to buy the entire air group.”

“The outcome of today’s hearing turned out as we had hoped, and we are excited that our employees, our customers, and the many communities we serve will now have a very real opportunity to see Ravn back in the skies later this summer,” Ravn CEO Dave Pflieger said in a written statement.

Among the attorneys participating in this week’s proceedings were two representing Float Shuttle, a Southern California commuter service. Rob McKinney, the company’s president, said the firm is interested in buying Ravn and getting it operating again in Alaska.

“It’s definitely our intent to keep Ravn as a going concern. We’re all about service to communities, and we really believe we have the right team we’re putting together,” he said.

Restarting Ravn is only one possible outcome: If the airline isn’t sold in whole or in pieces big enough that it can continue to operate, the bankruptcy plan calls for its assets to be put into a trust and sold to satisfy creditors.

Attorneys for creditors have been debating since April whether to end Ravn and sell its aircraft and other aircraft piecemeal, in what’s known as Chapter 7 bankruptcy, or in a manner that would allow the company to continue operating in Alaska or elsewhere.

An analysis conducted as part of its bankruptcy proceedings estimated that Ravn’s assets in liquidation would be worth between $21.2 million and $33 million, far less than its debts of $151.5 million to $185.8 million.

Before filing for bankruptcy on April 5, Ravn operated more than 400 flights per day using a fleet of 72 aircraft. During the coronavirus pandemic, passenger traffic dropped more than 90 percent.

“Because of the current economic circumstances, the debtors’ financial condition, and the substantial working capital needed to restart the debtors’ operations, the debtors have no prospect of generating positive cash flow before 2021 at the earliest,” according to court filings.

What will emerge

Several longtime players in Alaska’s air service industry said while there may be bids in the bankruptcy auction to take all of Ravn’s assets it is unlikely that an airline will reemerge with a reach close to what Ravn had before it shuttered.

Ravn Air Group regularly serviced 118 communities across the state and had approximately 1,300 employees when it stopped flying in early April. The carrier conducted both FAA Part 121 scheduled passenger and freight service to regional hubs with larger aircraft as well as Part 135 air taxi and charter service to smaller communities predominantly with single-engine aircraft through its subsidiary Ravn Connect. Ravn also comprised approximately 20 percent of the charter flight market across much of the state, according to the company.

Danny Seybert, former CEO of PenAir, said in an interview that he believes smaller carriers have largely backfilled the space left in Part 135 air taxi and charter service in the nearly three months since Ravn grounded its fleet.

“That void has been filled very nicely by very competent carriers,” Seybert said. “Now those communities have better, reliable service.”

Residents in many of the communities Ravn served — where it was often the only carrier — had become increasingly critical of the airline in recent years for deteriorating reliability in its business.

Ravn purchased PenAir out of bankruptcy in 2018 for $12.3 million. PenAir operated for decades out of Anchorage serving Southcentral and Southwest Alaska. However, an unsuccessful foray into Lower 48 markets strained the company’s finances.

Matt Atkinson, an owner of Fairbanks-based Wright Air Service said there it’s possible a smaller air taxi with more efficient routing could arise out of Ravn but he otherwise generally echoed Seybert’s assessment of the situation.

“Carriers around the state have stepped up in a major way and absorbed capacity,” said Atkinson, who is also president of the Alaska Air Carriers Association board of directors.

Wright operates primarily in Interior Alaska, but began serving some North Slope communities when Ravn shut down.

“With the tight markets Ravn did a lot of good things,” Atkinson said.

He added that COVID-19 — which Ravn leaders said pushed the company into bankruptcy — has suppressed air travel demand in Alaska’s villages as it has nationwide so the new air taxi market picture won’t be clear until the pandemic is over.

Atkinson said Wright Air is one of the bidders for some of Ravn’s assets, but is not interested in the entire airline.

Seybert said the scheduled Part 121 side of Ravn’s operations are “a whole different picture” and he sees room for a smaller carrier to operate in that space.

Alaska Airlines announced June 22 that it would be flying Embraer 175 aircraft, which can carry up to 76 passengers, to several hub communities across the starting in October through its regional sister airline Horizon Air. Alaska has traditionally flown larger Boeing 737-series jetliners.

The major carrier also said in May that it will be serving the Bristol Bay region — formerly a major market for Ravn — year-round once the busy salmon season there wraps up. Alaska previously flew to the Bristol Bay hubs of Dillingham and King Salmon during the summer peak for the commercial fishing and tourism industries.

Seybert noted that Alaska Airlines has filled some of the service gaps left by Ravn but added that even the smaller Embraer 175s are too large to service Unalaska and other Alaska Peninsula communities.

Unalaska is the busiest commercial fishing town in the country with roughly 55,000 passengers passing through the small community each year, according to Seybert, who said the current situation of mostly charter service is untenable over the long-term.

He emphasized that while Ravn’s bankruptcy was a major shake-up to the state’s air service industry, similarly impactful events have happened before.

“There will always be a carrier that will step up and meet the needs of the communities,” he said.

Seybert declined to comment on whether he is pursuing assets in the bankruptcy auction.

Updated: 
06/26/2020 - 12:21pm