RavnAir cancels auction for remaining planes, calling rural hub service into question

Dozens of RavnAir Group’s planes have been sold as the company nears the end of the bankruptcy process. (Katie Basile / KYUK)

UPDATE (Thursday, July 9): Southern California commuter service, Float Shuttle, will buy core Ravn assets for $8 million

Alaska’s largest rural air carrier, the bankrupt RavnAir Group, aborted a planned auction Wednesday for its remaining core assets, casting doubt over the fate of the company’s 1,300 employees and the future of flight service to the array of communities it once served.

Ravn wanted to sell nine of its big Dash-8 planes, which were used to fly from Anchorage to Fairbanks and rural hub communities like Dutch Harbor, Homer, Kenai, St. Mary’s, Aniak and the island of St. Paul. It was also planning to sell the federal “Part 121” operating certificates held by two of its subsidiary airlines, Corvus and PenAir.

Ravn had set a minimum bid of $19 million. But after more than five hours of delays and discussions with potential customers, a Ravn attorney, Jane Kim, told a teleconference full of aviation executives that none of the preliminary bids that the company had received were “acceptable,” and that the auction was off.

In a prepared statement issued afterward, Ravn’s chief executive, Dave Pflieger, called the cancelation “disappointing.” But he said that the auction process won’t formally finish until Ravn’s lenders decide to end a formal, court-approved sales process and place the company’s remaining assets into a “liquidating trust.”

“Given those facts, we remain optimistic that a new owner will still be able to step in and restart one of more of our two Part 121 airlines,” Pflieger said.

Kim, the attorney, said Wednesday that any planes left unsold by Ravn would be moved to California.

In another auction the previous day, Ravn sold off several buildings, along with dozens of its smaller planes. Those sales must still be approved by a federal bankruptcy judge at a hearing Thursday morning, which is also likely to clarify the fate of the larger planes and operating certificates.

Four potential bidders had called into Wednesday’s auction before it was called off: Anchorage-based Ryan Air, which hauls freight and passengers to and from communities in Western Alaska; a Southern California-based company called Float Shuttle; Connecticut investment firm Wexford Capital; and a group of unidentified Alaskans represented by bankruptcy attorney Cabot Christianson.

Ryan Air President Lee Ryan said that Ravn’s $19 million asking price for the larger planes and certificates was “not feasible” for his company, given the ongoing pandemic.

“There’s a lot of unknowns” involved with flying bigger planes in Alaska right now, given the pandemic, he said.

Ryan also chairs the Alaska Aviation Advisory Board, a state commission that’s examining how to fill gaps created by Ravn’s disappearance. He acknowledged that Wednesday’s canceled auction is cause for concern for the rural communities served by Ravn, but he also pointed out that the company isn’t currently operating and that other airlines’ planes are still flying.

“It’s kind of disheartening and unnerving and unsettling for Alaskans in general, especially those off the road system that are in rural communities that needed this asset to fly them back and forth,” Ryan said.

But, he added, “people are going to figure out a way to conduct business in the state.”

“It’s just a matter of it being pieced back together, somehow, and I think that’s what the advisory board is trying to figure out,” he said.

Before the COVID-19 pandemic, Ravn was Alaska’s largest rural air service, with $200 million in annual revenue, 1,300 employees and 72 planes that flew to more than 100 communities.

Read Alaska Public Media’s full coverage of the COVID-19 pandemic

Ravn, which was majority owned by a pair of East Coast private equity firms, operated three different companies.

Most of Ravn’s destinations were served by the bush plane service, Hageland Aviation, which operated 57 planes under a less tightly-regulated “Part 135” certificate issued by the Federal Aviation Administration. Hageland largely flew small planes between rural hub communities and remote villages.

Many of Hageland’s planes were sold in Tuesday’s auction.

RELATED: Ravn sells off dozens of small planes to Alaska companies

Wednesday’s auction included the larger planes and certificates held by Ravn’s two airlines, PenAir and Corvus, which operated under much more stringently-regulated “Part 121” FAA rules.

PenAir and Corvus both flew those larger planes between Anchorage and rural hub communities in the Aleutian Islands, Bristol Bay, the Kenai Peninsula and other rural parts of the state, often connecting passengers to the hub-to-village routes served by Hageland Aviation.

Before the COVID-19 pandemic hit, Ravn’s statewide breadth allowed customers the convenience of booking flights on all three airlines through a single platform. Ravn also had access to what appeared to be a diverse, resilient market: If demand dropped off in one region of the state, the company could count on others to sustain it.

But COVID-19 arrived at a time of year that Ravn was already vulnerable: The company tended to run at a loss during the winter and spring, before being buoyed by strong financial performance in the summer and fall tourist season, Chief Financial Officer John Mannion said in a sworn statement in the bankruptcy proceedings.

The pandemic caused a 90% drop in passenger revenue across its three airlines, at a time when Ravn already owed more than $90 million to 13 different lenders. Those lenders include American, French and Italian banks, an array of investment firms and GSO Capital Partners, an arm of The Blackstone Group, the huge New York City-based investor.

RELATED: Ravn is fighting to keep flying, but a French bank is pushing to sell off the company’s planes

As Ravn navigated the bankruptcy process, its managers advertised to find a buyer who could purchase the whole company and keep it intact. But the 13 lenders pushed Ravn to sell off its assets so that the company could pay back its debts.

Residents of the remote communities once served by Ravn have been closely following the bankruptcy process.

After Ravn stopped flying, people from the Bering Sea island of St. Paul initially had to pay for chartered planes to get to Anchorage for medical treatment and other business. Now, another company, Grant Aviation, has started service from the island to either Cold Bay or Dutch Harbor, said Amos Philemonoff, the president of St. Paul’s tribal government.

Once in Cold Bay or Dutch Harbor, residents then must catch one or even two more flights to reach Anchorage, and the entire journey can take two to three days, Philemonoff said.

“That’s the hurdle,” he said.

Everyone is anxious to see what St. Paul’s air service will look like for the interim, and for the long term, residents need restoration of a direct flight to Anchorage, he said.