Era calls filing just a hiccup
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BANKRUPTCY: Airline plans to reorganize after dispute over cash with lender.[/FONT]
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[FONT=VERDANA, ARIAL, HELVETICA, SANS-SERIF]By PAULA DOBBYN
Anchorage Daily News
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(Published: December 30, 2005)
Era Aviation Inc. filed for Chapter 11 bankruptcy reorganization this week after a dispute with its lender.
The Anchorage-based regional airline, which serves Southcentral and Western Alaska, will continue flying while it reorganizes and expects no disruption to passengers, said president Paul Landis on Thursday.
"We're flying the same schedule with the same equipment and fare structure," Landis said.
The bankruptcy filing became necessary when Capital Source Financing of Chevy Chase, Md., began restricting the airline's access to cash, Landis said. The clampdown followed a dispute over where Era met its target for third-quarter operating cash flow.
Era contends that it hit the target while the lender disagrees, Landis said.
He declined to say how much cash Era had on Sept. 30, the end of the third quarter. But Era is mostly current on its debt to vendors and is in overall good financial shape, he said.
"From the company's perspective, things are going fine financially. We feel the company was in a solid position," Landis said.
Capital Source provided financing to a small group of California investors that bought Era last July from Seacor Holdings Inc. The managing partner is Willie Gault, a former pro football player.
Under the financing agreement, all the money that Era makes goes into an account that Capital Source controls, Landis said. "They handle all the cash first," he said.
If the lender isn't happy with the airline's performance, it has a variety of tools to clamp down, Landis said.
That includes chocking off funds or seizing assets.
Besides Era Aviation, the investor group that purchased the airline also filed for Chapter 11. The group's largest creditor is Capital Source, which is owed $14.9 million, according to court documents.
No one at Capital Source was available late Thursday.
Era is confident that the bankruptcy judge will find in its favor, Landis said, and that the company will emerge revitalized.
The airline has provided aviation service in Alaska since 1948. As of last summer, it employed more than 300 people.
Era Aviation is a separate business from Era Helicopters, which also operates in Alaska.
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