After filing for bankruptcy protection last summer, PenAir has been ordered to sell off its assets to avoid a 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 Gerard 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 and that he already had bidders lined up for the sale.
He's also assured Vice Mayor Dennis Robinson that Unalaska's flights will continue normally during and after 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.
Correction: A previous headline for this story said PenAir had been ordered to "liquidate." That word does not apply to the airline's Chapter 11 bankruptcy proceedings, although it was used by city officials and is commonly used to refer to selling assets. Instead, PenAir has been ordered to sell its assets to a bidder who will continue to operate the airline. In an email to KUCB, Trustee Gerard McHale wrote: "The headline [made] it sound like we're having a 'liquidation sale,' which most people equate to a closure of a business. This is clearly not the case here. The business will continue to operate, but under the control of the successful bidder." KUCB has corrected the headline above.