Ravn, Alaska’s Biggest Regional Airline, Files for Bankruptcy
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Ravn Air Group, whose airlines connect the far reaches of Alaska, filed for Chapter 11 bankruptcy after it ran out of cash to pay staff and keep its planes flying.
Passenger revenues from the company’s three airlines fell as much as 90% after Alaska’s governor announced the first case of COVID-19 in the state last month, Chief Financial Officer John Mannion said in a court declaration. By the end of March, Ravn didn’t have enough cash to make payroll, and on April 5 the state’s biggest regional carrier laid off most of its employees.
Ravn, owned by J.F. Lehman & Co. and W Capital Partners, canvassed lenders for additional financing in recent weeks but came up mostly empty. The Anchorage-based carrier sought help from state and federal governments in the form of loans, equity investments and grants — including applying for relief under the CARES Act — but none of the aid would’ve been available by the time the company ran out of cash, Mannion said.
Ravn is on the leading edge of distress that’s spreading in the aviation industry as the coronavirus curbs travel around the globe. Lawmakers have said the $2.2 trillion stimulus passed by Congress contains provisions specifically at bolstering aviation jobs, while Treasury Secretary Steven Mnuchin has said airlines should propose up-front how the government could retain equity stakes in their operations in exchange for grants.
Alaskan Service
Ravn had more than 1,300 employees and carried more than 740,000 passengers annually before suspending operations. The company owns 72 airplanes that made as many as 400 daily flights, court papers show. Ravn’s fleet of small aircraft shuttled people, mail and cargo to more than 110 communities including Fairbanks and Kodiak, as well as remote areas such as Deadhorse on Alaska’s harsh North Slope, home to vast oil industry operations.
The bankruptcy filing allows Ravn to “hit pause” while it waits for financial aid that would help it restart operations, the company said in a statement. The company has been in contact with other Alaskan air carriers to help them establish new or replacement service where possible, according to the statement.
The company owes about $91 million to lenders who have a claim on assets, court papers show. Some of those same lenders have agreed to provide as much as $12 million in additional financing to carry out the bankruptcy.
Ravn listed assets and liabilities of at least $100 million each in its bankruptcy petition in Delaware. Ravn hopes to get rescue financing either from the CARES Act or otherwise and restart operations, Mannion said.
Equity Owners
J.F. Lehman, with offices in New York and Washington, specializes in aerospace investments. New York-based W Partners takes equity positions by purchasing stakes from single holders of growth equity stage companies, according to its website.
Because of Alaska’s harsh winters, the business is highly seasonal and depends on strong results during summer and autumn, Ravn said. Bookings dropped dramatically after the state’s governor announced the outbreak had reached Alaska on March 12, and Ravn “began receiving demands from rural hubs and villages around Alaska not to fly passengers to or from their communities.” The state issued a March 20 advisory against non-essential travel, and cash flow quickly turned negative.
The case is Ravn Air Group Inc., 20-10755, U.S. Bankruptcy Court for the District of Delaware.
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