After filing for bankruptcy protection last summer, PenAir has been ordered to sell off its assets to avoid a total shutdown.
A federal judge has scheduled the auction for early October, following an emergency motion by the trustee appointed to oversee the airline's bankruptcy proceedings.
In the motion filed Wednesday, Trustee Gerald McHale argued for the "expedited sale schedule" in light of PenAir's "quickly deteriorating cash position."
Court documents indicate the company owes at least $10 million to more than 200 creditors, including the State of Alaska, the City of Unalaska, and Alaska Airlines.
PenAir is one of southwest Alaska's largest air carriers — and the only one connecting Unalaska and most Aleutian and Pribilof communities to Anchorage.
McHale told KUCB Friday that he's confident PenAir has "enough financial backing" to remain afloat through November.
He's also assured Vice Mayor Dennis Robinson that Unalaska's flights will continue normally during the sale. But he said "that remains to be seen" for the carrier's seven other routes, which include Dillingham, Cold Bay, and St. Paul Island.
PenAir CEO Danny Seybert is currently traveling and unavailable for comment.
The airline expanded to the Lower 48 in 2011, but closed its hubs in Portland, Oregon and Denver, Colorado last August after filing for bankruptcy protection.
Court documents show PenAir has taken out $4.5 million in loans since then.
This is a developing story. Please check for updates.