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Alaska warned U.S. government its largest regional airline was on verge of collapse: letter

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Via Reuters Finance

WASHINGTON/CHICAGO (Reuters) – Alaska’s congressional delegation warned U.S. Treasury Secretary Steven Mnuchin last week that many of its airlines, including its largest regional carrier, RavnAir Group, were on the verge of collapse, according to a letter seen by Reuters.

FILE PHOTO: Delta Air Lines passenger planes are seen parked due to flight reductions made to slow the spread of coronavirus disease (COVID-19), at Birmingham-Shuttlesworth International Airport in Birmingham, Alabama, U.S. March 25, 2020. REUTERS/Elijah Nouvelage

“Without badly needed federal support, many of our air carriers are in danger of bankruptcy and failure and could leave many of our rural and Alaska Native communities completely isolated,” U.S. Senators Lisa Murkowski and Dan Sullivan and Representative Don Young said in the Friday letter.

The Treasury Department had no immediate comment.

RavnAir filed for Chapter 11 bankruptcy on Sunday, laying off nearly its entire staff and grounding all of its 72 planes, saying it was clear that government aid would not arrive before it ran out of cash.

Its Chapter 11 filing underscored the challenges facing other U.S. regional carriers that, like larger airlines, are seeking federal aid to help them through the worst downturn the industry has ever faced.

Alaska is more dependent on passenger and air cargo transport than any other state in the country because over 80% of the communities are only accessible by air.

“This lack of air service could damage our other industries such as oil and gas, mining, seafood, and tourism,” the congressional delegation said in the letter.

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The Trump administration is weighing applications from numerous airlines as it considers how to distribute up to $32 billion as soon as this week for passenger and cargo carriers and airport contractors under the CARES Act meant to help the sector cover payroll costs.

Regional airlines, which tend to serve remote communities, are particularly vulnerable to the downturn because they are not publicly traded and cannot access capital markets. They have asked the U.S. Treasury Department to prioritize assistance for them when awarding the grants.

RavnAir – which has a partnership with Alaska Airlines and interline agreements with American Airlines Group Inc, United Airlines Holdings Inc and Delta Air Lines Inc – said it applied on Friday for federal payroll support but did not know if or when it would be granted.

It cited an “astonishing” decline in bookings and revenue due to the coronavirus in its Chapter 11 filing in Delaware.

Airlines began seeing a dramatic drop in bookings around March 12 when it became clear that coronavirus outbreaks were increasing across the world.

“In the event that government relief, under the CARES Act or otherwise, becomes available, (the company) hope to restart operations with as many of its laid-off employees as required,” RavnAir said in the filing.

In a letter posted on Sunday, RavnAir Chief Executive Dave Pflieger said the airline was working to “resume the vital air service you depend on … that are essential to our communities and the state of Alaska.”

Many of RavnAir’s customers fly on tickets subsidized by Medicaid, the government program for the poor and disabled, it said.

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Top Democrats have urged Mnuchin to move quickly to release the grants without imposing unreasonable conditions.

Reporting by David Shepardson and Tracy Rucinski; Editing by Lisa Shumaker and Marguerita Choy


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