By Vince Sullivan

Law360 (April 6, 2020, 10:32 AM EDT) -- A regional Alaskan airline operator filed for Chapter 11 protection Sunday in Delaware saying that travel restrictions and a massive reduction in passengers resulting from the global outbreak of COVID-19 have hampered its cash flow to the point of insolvency and forced it to ground its fleet and lay off all of its employees.

In a first-day declaration from Ravn Air Group Inc.'s chief financial officer, the company said its woes began on March 12, when Alaska's governor announced the first case of the novel coronavirus in the state and the debtor's revenue began a precipitous decline.

"It was at that time that airline bookings at the company dropped dramatically, with the company experiencing an astonishing 80-90 percent decrease in passenger revenue at all three of its airlines, as compared to the company's historical results for the same period," Chief Financial Officer John Mannion said in the declaration.

Ravn operates airlines that provide passenger service as well as charter, mail, medical delivery and freight services under the names RavnAir ALASKA, PenAir and RavnAir CONNECT. It earns the majority of its revenue from passenger service that peaks in the spring and summer months, while the fourth and first quarters are generally when its capital costs outstrip its revenue due to decreased demand during the harsh Alaskan winters, the declaration said.

The company is carrying $90 million in secured debt into court under a credit agreement administered by BNP Paribas, Mannion said. Negotiations with its existing lenders did not result in any new financing and applications to receive grants under the recently passed Coronavirus Aid, Relief, and Economic Security Act have not yet been processed by the federal government.

According to Mannion's declaration, Ravn submitted its applications for relief on April 3, but there was no hope a decision on aid would be made before the company ran out of operating cash and would be forced to file for bankruptcy.

"In the event that government relief, under the CARES Act or otherwise, becomes available, the debtors hope to restart operations with as many of its laid-off employees as required by the CARES Act," the declaration said.

In a letter to customers posted on the debtor's website, CEO David Pflieger said the bankruptcy filing was made because it was the best option to secure a possible return to operation in the future while waiting for a decision on federal aid.

"How long we must wait is uncertain, but I want to assure you that everyone here at Ravn is doing everything possible to get back in the air very soon, so we can resume the vital air service you depend on to get home to your families, to your businesses, to medical appointments, and to other duties that are essential to our communities and the State of Alaska," the letter said.

Secured lender BNP Paribas is leading a group of lenders that will be providing $12 million in new term loans as post-petition financing, as well as a roll-up of $24 million of existing debt, according to court filings. The funds will be used to pay for operating expenses, including employee payroll obligations, and the administrative costs of the case.

A first-day hearing has been scheduled for 10:30 a.m. Tuesday before U.S. Bankruptcy Judge Brendan L. Shannon. The hearing will be conducted via telephone conferencing.

Formed in 2009 by the combination of five well-known and long-tenured Alaskan air transport businesses, Ravn operated 72 planes of varying sizes from 21 hub airports in the Frontier State. It served 115 destinations and completed 400 flights per day before it ceased operations over the weekend, according to the declaration.

It had 1,300 employees and carried 74,000 passengers annually, Mannion said. It provides passenger and charter services as well as mail and mail bypass services that transport vital medical and food supplies to some of the most rural and remote parts of Alaska. About 54% of its revenue comes from passenger services, with 23% coming from the mail and mail bypass services, 12% from charter services and 5% from freight services.

It serves clients in the oil and gas, seafood, mining and tourism industries.

The debtor is represented by Victoria A. Guilfoyle, Stanley B. Tarr and Jose F. Bibiloni of Blank Rome LLP and Tobias S. Keller, Jane Kim and Thomas B. Rupp of Keller Benvenutti Kim LLP.

The case is Ravn Air Group Inc., case number 1:20-bk-10755, in the U.S. Bankruptcy Court for the District of Delaware.

--Editing by Rebecca Flanagan and Emily Kokoll.

Update: This story has been updated with more information on the case.

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