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An attorney last week asked a judge to allow a sale of the assets of PenAir, an Alaska airline that filed for Chapter 11 bankruptcy protection about a year ago.
The company is one of the largest regional airlines in Alaska and serves a number of rural communities with flights to and from Anchorage, where it is based. CEO Danny Seybert said he doesn't expect any changes in service.
In federal bankruptcy court last week in Anchorage, an attorney for PenAir's trustee in the case sought to schedule an auction for the assets during the last week of September or the first week of October, according to a court document filed Aug. 15.
The attorney, Michael Markham, cited in that filing how long the company has been in bankruptcy and also "the debtor's quickly deteriorating cash position."
Jerry McHale, the trustee for the case, said his top priorities are to operate a safe airline, to retain workers and maintain service to the villages PenAir flies to. The company has about 420 employees, he said.
The minimum bid for the assets would be $5.5 million in cash, according to the court filing. That amount is enough for the airline to pay off debt to a company called Wexford Capital, which loaned PenAir money during the bankruptcy, said Markham.
"We're confident that somebody's going to step up and buy it, we just won't know the price and all of the details until the end of the bid process," he said.
More than one party is interested in buying PenAir's assets, said McHale.
The airline was founded in 1955, and in 2012 expanded its operations outside of Alaska, according to court filings.
PenAir's financial performance deteriorated in part because the airline's hubs in Portland and Denver "have not lived up to expectations," according to a court filing from August of 2017.
The company only operates flights in Alaska now. Its last flight operations in the Lower 48 wound down in May, said Seybert.
“It wasn’t just any one thing, but a combination of many many things” that led to filing for bankruptcy, Seybert said. Some of those issues were expansion, late delivery of aircraft, and cost overruns on maintenance, he said.
PenAir's website says it serves King Salmon, Cold Bay, Dillingham, Sand Point and several other small Alaska communities.
"It services these places nobody else services. In some respects it's a utility," Markham said. "Bankruptcy tends to be about the money. This one's more about continuing to keep people employed and continuing to service these areas."
PenAir's creditors with the 20 largest unsecured claims are owed more than $9 million, according to a court document from August last year, when the company filed for bankruptcy protection.
"In candor, the creditors know they're not going to get anything out of this," said McHale.
The bid procedures still need approval. Markham said he plans to file an amended motion that will be heard in court Aug. 29 and he anticipates the judge will grant the motion then.