RavnAir Group’s two regional airlines will continue flying in Alaska after a Southern California commuter service struck a last-minute deal to buy their operating certificates out of bankruptcy, outbidding a group of veteran Alaska transportation executives.
FLOAT Shuttle will pay $8 million to acquire the federal certificates held by the two Ravn-operated airlines, PenAir and Corvus. The deal also includes six of nine de Havilland Dash-8 planes, plus a single Saab 340, that Ravn had unsuccessfully tried to sell at auctions earlier in the week.
The revived company intends to use a $32 million federal COVID-19 payroll loan that’s been provisionally granted by the Trump administration, said Rob McKinney, FLOAT Shuttle’s chief operating officer, who will move to Alaska to lead the new Ravn. It aims to resume flying in about a month, preserving an array of regional flights from Anchorage that some Alaskans feared would disappear amid Ravn’s bankruptcy.
After a hearing Thursday, no additional approvals are needed by the Delaware bankruptcy judge overseeing Ravn’s case, McKinney added.
FLOAT Shuttle was the brainchild of a pair of California entrepreneurs, Tom Hsieh and Arnel Guiang, and it is a wholly different enterprise than the Alaska airlines that face rugged terrain and foul-weather flying.
FLOAT Shuttle’s existing business uses small planes to fly Los Angeles commuters over gridlocked highways; its name stands for FLy Over All Traffic.
Its primary investor, according to Hsieh, is HMC INQ — an “incubator” fund that targets businesses run by alumni of a small, Southern California liberal arts school called Harvey Mudd College. FLOAT Shuttle is also operated under less-stringent federal regulations for commuter service, known as Part 135, compared to the more rigorously-regulated Part 121 certifications used by Ravn’s airlines.
But company officials say they know what they’re getting into: McKinney led a Southeast Alaska airline, Wings, for six years. And FLOAT Shuttle’s vice president of operations also worked in Alaska for five years as a Ravn employee, McKinney said.
“Not only do we bring a depth of aviation knowledge, we feel confident that we’re Alaska-specific, as well,” McKinney said.
Hsieh, who joined McKinney in a 30-minute phone interview Thursday, added that the new owners hope to improve Ravn’s less-than-sterling reputation among rural Alaskans.
“We want to be the hometown airline,” he said.
The deal was a surprise development in the bankruptcy proceedings, after earlier efforts to sell the Dash-8s and the operating certificates had failed to generate bids that were “acceptable” to Ravn, the company’s attorneys said. Ravn originally set a minimum price of $19 million for the certificates, the nine Dash-8s and the Saab.
Ravn is majority owned by a pair of East Coast private equity companies, W Capital and J.F. Lehman & Co.
Before the COVID-19 pandemic, it was Alaska’s largest rural airline, with 72 planes, 1,300 employees and more than 100 destinations across the state. Executives said Ravn experienced a 90% drop in revenue when the pandemic hit, and owed more than $90 million to an array of creditors that included investment funds and French, Italian and American banks.
At an auction Tuesday, the company raised $36 million by selling dozens of smaller planes operated by its bush plane service, Hageland Aviation, which connected passengers from rural hub communities to more remote villages. The buyers, which also acquired some of Ravn’s buildings at rural airports, say they intend to fill gaps left by Ravn’s disappearance and have hired some of the company’s former employees.
But after selling the smaller planes, Ravn aborted an auction planned for the larger Dash-8s and the federal operating certificates for PenAir and Corvus, which flew between Anchorage and rural hubs like Homer, Unalaska, Unalakleet, Aniak and Kotzebue. The company then negotiated privately with potential buyers before announcing the sale of the planes and certificates on Thursday.
Those larger planes and the “Part 121” federal certificates are more expensive and logistically complicated to maintain than the smaller planes — a fact keenly understood by Alaska political and business leaders who feared the bankruptcy process could end with the assets being moved out of state.
That was what drew the interest of an Alaska-based investment group that negotiated with Ravn’s bankruptcy attorneys and lenders after the canceled auction. It included Jim Jansen, the chairman of transportation company Lynden, along with former VECO executive Roger Chan, retired Air Force General Joe Ralston and aviation executive Rob Everts.
The group wanted to buy the Dash-8s and lease them to an airline that would have been run by Bob Hajdukovich, a former Ravn chief executive. But their bid was rejected, Jansen said in an email.
“It is unfortunate that the PenAir and Ravn large aircraft assets did not transfer to Alaskan operators,” Jansen said in an email.
But, he added, the smaller planes and rural facilities were effectively dispersed to “good Alaska carriers” that will fill much of the void left by Ravn’s disappearance.
In the remote communities served by Ravn, elected officials greeted the news of FLOAT Shuttle’s acquisition with skepticism.
“My question would be: Do they know what they’re up against?” said Dennis Robinson, vice mayor of Unalaska, the Aleutian Island fishing port famous for its rough weather and flight cancellations. “I think they’re in for a pretty rude awakening, flying a float service out of Southern California and coming into Alaska.”
Last year, one of Ravn’s planes, a Saab 2000, crashed and killed a passenger in Unalaska. Afterward, to residents’ disappointment, the company switched to using the smaller and slower Dash-8s.
Since the company declared bankruptcy and shut down, residents and fishermen have depended largely on chartered planes, loosely coordinated through a Facebook group. Unalaskans can also get back to Anchorage by taking a twice-a-week flight to Cold Bay and then getting on another plane, Robinson said.
“It’s working — it’s not the best,” he said. “There’s nothing guaranteed, and if you’re looking to come out here, you better plan on being able to waste a week if you have to.”
Robinson said he’s worried Unalaska will continue to face service gaps unless the Ravn operators acquire more planes than the ones they purchased Thursday.
McKinney, Ravn’s new chief executive, said that initially, the company does not plan to operate the Saab 2000s, which were leased. While FLOAT Shuttle only bought six of the Dash-8s that Ravn originally offered at auction, it plans to lease three more planes to restore the fleet to its full size.
“And then we’ll kind of take a look at the business, vis-a-vis COVID, and what makes sense to continue to grow from there,” McKinney said.
All of the planes will remain in Alaska, he added. “We are 100% focused on Alaska and serving Alaskans,” he said.
One area where Ravn’s new owners say they hope to improve is their relationship with the rural communities served by the company.
Residents often criticized Ravn’s East Coast ownership for being unresponsive and inaccessible. Robinson said he’d hoped that the company would be bought out of bankruptcy by the Seyberts — a longtime Alaska aviation family that founded PenAir before it, too, declared bankruptcy and was purchased by Ravn.
Danny Seybert, PenAir’s former chief executive, “knows the Aleutians,” Robinson said.
“He knows the weather. He knows the people,” Robinson said. “And he knows how to do it.”
Ravn’s new owners said they’re aware of the company’s reputation in rural Alaska, and promised they would be more responsive.
“I’m not always going to be able to tell people what they want to hear, and sometimes I might have to take it on the chin, but to me, that comes with the territory,” McKinney said. “They realize that this is not some big, evil corporation that’s standing on my neck. It’s someone out there who’s arm and arm, trying to do the best they can.”
FLOAT Shuttle’s leaders also said the company’s primary investor, the incubator fund, has a different mentality than private equity funds, which owned Ravn before the bankruptcy.
The incubator, HMC INQ, only invests in companies have at least one owner who’s a graduate of Harvey Mudd, the California college that focuses on engineering, science and math. In FLOAT Shuttle’s case, that’s co-founder Hsieh, who describes himself as a “tech executive” and “social entrepreneur.”
Hsieh said incubators do not exert much “operational control” over the businesses they invest in.
“What they’re about is really enabling entrepreneurs who have the vision, and in resourcing them,” he said. “They’re about investing in a vision, and in the future.”
