Mondor: Old baggage weighs down launch of New Ravn

By Colleen Mondor

Colleen is a long-time aviation writer and is the author of “The Map of My Dead Pilots: The Dangerous Game of Flying in Alaska.” Find her at chasingray.com or on Twitter @chasingray.

Alaska’s rural air service suffered a massive shock after the abrupt bankruptcy of Ravn Alaska this spring. In the months that followed a host of other commuters stepped up to cover flights previously flown by Ravn’s three air carriers (Corvus Airlines, Hageland Aviation and PenAir), a particularly difficult endeavor in the midst of the pandemic. With Ravn gone, attention soon shifted to the sale of its assets, the question of what would become of the air carrier certificates, and if a new company would move in to cover significant routes such as those to Unalaska, St. Paul and the Kenai Peninsula.

I have been following the Alaska aviation industry for a long time, so when California-based FLOAT Shuttle, a company that had been in business for only a year and did not operate its own flights, acquired Corvus and PenAir’s certificates as part of its asset purchase, I wanted to learn more. Looking into aviation companies, with their penchant for mergers and ownership changes, can be difficult but with a recent bankruptcy involving one of FLOAT’s founders —and the ensuing dirty laundry that is revealed in bankruptcy court—plus a host of documents gathered by the National Transportation Safety Board (NTSB) in an accident investigation, I got a close look at the aviation expertise tapped for the “New Ravn”. What I found—a fatal crash, financial mismanagement and a lack of commitment to service—should be worrying to Alaska’s aviation sector and the flying public.

Although the name “New Ravn” has been used since the FLOAT purchase, the bankruptcy court judge made explicit statements in his approval of the sale that the buyer was “not a mere continuation” nor “a successor” to Ravn and that the sale in no way constituted a merger or consolidation. This explains why despite FLOAT’s assertions they would be flying this summer, the FAA and U. S. Department of Transportation (DOT) have been more circumspect.

FLOAT Shuttle itself is a Los Angeles air commuter service which has never operated a commercial flight. According to the DOT, FLOAT contracted out all of its 94 flights with commuter Southern Airways prior to the smaller company suspending operations due to Covid-19.  

MORE: DOT Public Charter database 

Recently via email, Southern Airways Chief Marketing Officer Keith Sisson explained that FLOAT purchased their charter company, Executive Express Aviation, in late 2019. The deal, wrote Sisson, included the “…understanding that we would operate their flights until such time as they were prepared to operate their own flights on the EEA (or some other operating certificate).” According to the FAA, Executive Express Aviation is moving its base to Alaska but the charter certificate has not yet been utilized by FLOAT.

Since the Ravn asset purchase, Rob McKinney, who is chief operating officer of FLOAT and CEO of the New Ravn, has stressed that there will be a complete separation between the two companies. “There is no relationship between FLOAT and Ravn Alaska,” he said in a July 31 interview with KUCB. “FLOAT will have nothing to do with Ravn and its resurrection.” According to McKinney, the purchase of Ravn was facilitated by one primary investor, Josh Jones, who is co-founder of DreamHost and a partner in HMC INQ. (New Ravn is also looking for additional investors through Wefunder.) 

LISTEN: KUCB interview (around the 9-minute mark)

While FLOAT may not be directly involved in New Ravn, common management between the two companies remains, especially McKinney, and his extensive experience in the aviation industry  has been emphasized repeatedly in public statements. In her interview with him, KUCB reporter Hope McKenney asked McKinney about his Alaskan experience, specifically his tenure with SeaPort Airlines. SeaPort was an Oregon-based Part 135 commuter where McKinney served as CEO and President for eight years. During that period SeaPort also owned Juneau-based commuter Wings of Alaska, which suffered a fatality crash enroute to Hoonah five years ago.

McKinney made clear in the interview that while the crash of Flight 202 was personally devastating, the primary blame rested with the pilot. 

“It was really one of the worst days of my life…” he said, continuing “You know, while I can’t be in every cockpit and make sure no pilot ever makes a mistake or makes an error, there’s certainly lessons to be learned.” 

He also emphasized a stark difference between what happened at Wings of Alaska and his view of Ravn’s future, saying. “…there’s nothing really that was … applicable to that specific situation that will be [or] would be applicable at all to how Ravn will operate.” 

It should be noted however that the NTSB cited not only the pilot in the probable cause determination for the crash of Flight 202 but also SeaPort Airlines, for failures in oversight and operational control that led to the dispatch of the flight into marginal weather conditions.

As to SeaPort’s 2016 bankruptcy, McKinney quickly dismissed any responsibility: “As far as the bankruptcy, that happened almost a year after I left the company,” he said, adding “…decisions were made that I really wasn’t a part of when I decided to move on to something else.”

This statement is not factually correct.

McKinney was CEO and President of SeaPort just prior to the company’s filing for Chapter 11 protection. SeaPort announced both the filing and his resignation the same day, February 5, 2016. McKinney’s tenure with the company dates back to its earliest days, as chief operating officer when SeaPort purchased Wings of Alaska the summer of 2008. 

A careful look at the company’s history leading up to the bankruptcy filing provides valuable insight into how McKinney’s leadership contributed to its unfortunate end.

Promises made and broken

There were financial and management upheavals for SeaPort from almost the very beginning. In November 2009, the former owners of Wings of Alaska filed a lawsuit against SeaPort co-founder John Beardsley and the company for failure to make payments on the purchase of the Wing’s Juneau hangar. As reported in the Juneau Empire at the time, Beardsley had “personally guaranteed the deal.” An amount of $1.5 million was owed and the plaintiffs sought the return of Wings of Alaska.

While Beardsley repeatedly insisted he was not responsible, the lawyer representing the former owners was confident they would prevail as SeaPort still relied upon the Wings operating certificate to stay in business. The suit was dismissed in 2010 and payments were resumed with the caveat that it could be brought a second time if defaults occurred again. In the meantime, Kent Craford, another company co-founder who also served as SeaPort’s CEO, was abruptly forced out in late 2009; three months later, in February 2010, McKinney was named President. (Craford would go on to purchase Alaska Seaplanes with Mike Stedman in 2011.) McKinney would later also be named SeaPort CEO.

As Wings of Alaska continued routes in Southeast, SeaPort expanded across the Lower 48, obtaining Essential Air Service (EAS) contracts in Oregon, California, Mississippi, Kansas and Texas among other destinations. These EAS contracts are federally subsidized routes to provide affordable passenger service to rural airports. There are about seventy EAS contracts in Alaska.

SeaPort management also made the decision to shift operational control of the Wings Juneau base to Portland, a choice that would later command careful attention from NTSB accident investigators after the crash of Flight 202.

During its rapid expansion, SeaPort typically hired low-time pilots for its fleet, which was comprised of single-engine aircraft operating with two-pilot crews. The EAS business was quite  lucrative; in 2014 SeaPort was collecting $16.2 million in subsidies from the federal government. But as a national pilot shortage began to take hold, SeaPort struggled with its hiring model and found itself increasingly unable to fulfill EAS contractual route obligations. For example, in May 2015, SeaPort gave the required 90-day notice to pull out of Greenville, Miss. DOT directed it to continue until a new carrier initiated EAS service there, but the company could not hold Greenville as directed and dropped the route without DOT approval. In August, SeaPort gave the required 90-day notice to pull out of Muscle Shoals, Ala., and Tupelo, Miss. DOT again directed it to continue until a new carrier initiated service and again, the company did not. In January 2016 Seaport announced it was immediately terminating service to Great Bend, Kan., Salina, Kan., El Centro/Imperial, Calif.,and Visalia, Calif. All of these failures to maintain contracted service resulted in the DOT ultimately assessing a fine of $30,000 against the company, while also forcing the towns involved to endure periods of interrupted air service.

MORE: DOT’s Essential Air Service historical reports 

As SeaPort was actively dropping contracts, its primary owner, Beardsley, turned his attention to another goal: the purchase of Georgia-based Part 121 charter company Aerodynamics. In early July 2015, Beardsley and his wife purchased Aerodynamics, changing the name to ADI/Aerodynamics, and promptly announced intentions to obtain scheduled service approval and pursue EAS contracts.

Rob McKinney was named CEO with a stated intent to provide “one-third of his time with the air carrier”. This raised a concern for DOT which issued a letter on Aug. 5, 2015, to ADI/Aerodynamics requesting further clarification of McKinney’s responsibilities. His attention was already consumed elsewhere by then, because on July 17, Wings of Alaska Flight 202 crashed while enroute to Hoonah.

FLIGHT 202

In the subsequent investigation of the accident, which resulted in the death of the pilot and serious injuries to the four passengers, the NTSB found multiple issues with operational control between SeaPort’s center in Portland and its Juneau-based pilots, who operated entirely under Visual Flight Rules (VFR). Required risk assessment forms were ignored or filled out with no factual intention; operations personnel were incapable of contacting pilots in the air, confusion reigned over who should be consulted on weather minimums before initiating a flight, and training was lax in assigning operational control. Investigators also found that pilots and management all had varying standards for minimum glide distance requirements to operate the company’s many flights over water.

MORE: The National Transportation Safety Board’s report on Flight 202 

The Flight 202 pilot, who had 840 hours of total flight time, departed in a single-engine Cessna 207 into a forecast which included mountain obscuration, rain, mist and isolated conditions requiring flight under instrument flight rules (IFR). The area of the crash site “was on the boundary of marginal VFR to IFR conditions with isolated moderate low-level turbulence.” 

The investigation revealed that Portland operations personnel engaged in only the most cursory of discussions with the pilot prior to her departure from Juneau. No one suggested risks associated with the combination of her low time, limited Southeast experience (she had been in Alaska less than two months) and the weather. In truth, they barely spoke to her at all. Ultimately, the accident’s probable cause was determined to be the pilot’s decision to fly under VFR into instrument conditions, but contributing factors included SeaPort’s “failure to follow its operational control and flight release procedures and its inadequate training and oversight of operational control personnel.” The FAA was also found to be contributory for its failure to hold SeaPort accountable for regulatory deficiencies and ensuring the company’s compliance with operational control procedures.

More expansion, unpaid bills and blurred lines

Three months after the crash, SeaPort sold Wings of Alaska to Fjord Flying Service and exited the state. As signs of the company’s stress continued, McKinney and Beardsley maintained their determined pursuit of scheduled service approval from DOT for ADI/Aerodynamics. Meanwhile, unable to fly all of its EAS routes, SeaPort  tried to cover them by entering into a wet-lease contract with Part 135 commuter Executive Express Aviation. (Executive was then still owned by Southern Airways and would later be sold to FLOAT Shuttle in 2019.) Then the payment defaults to the former owners of Wings of Alaska began again, and that lawsuit was refiled. This case , which would be won at each step by the plaintiffs, has been appealed repeatedly by Beardsley. The most recent arguments were heard before the Alaska Supreme Court in early 2020 and a decision is expected at any time.

As SeaPort’s position became more tenuous, Beardsley and McKinney finally succeeded on Jan. 28, 2016, in obtaining federal approval for scheduled service for ADI/Aerodynamics so it could pursue potentially lucrative EAS contracts. But on Feb. 1, Executive Express Aviation filed a complaint with DOT challenging ADI’s approval, arguing that its common management and ownership with SeaPort made that company’s inability to pay its bills a problem for ADI as well. Executive’s objection centered on the EAS contracts which it had been flying for months for SeaPort. The objection detailed how the September contract with Executive mandated that SeaPort would pay Executive the EAS subsidy while SeaPort could retain any ticket revenue and was responsible to pay all taxes. For two months, the contract was satisfactory but in January, even though SeaPort received the EAS subsidy, it did not pay Executive. SeaPort then subsequently canceled almost all of its EAS routes.

Executive alleged that with the scheduled service approval for ADI/Aerodynamics in hand, Beardsley was “shifting focus and resources from SeaPort to ADI.” ADI insisted that while the two companies had “common ownership” they were still “separate businesses and legal entities and separate air carriers.” It is striking however just how intertwined the companies were when McKinney referred to them in other communications.

In a full page letter to customers in the Fall 2015 issue of SeaPort’s “Cloud 9” magazine, McKinney asserted that ADI would “use the SeaPort brand and code” for its scheduled flights and this would “propel the SeaPort brand into cities that we could not have contemplated previously.” Signing as CEO of both Aerodynamics and SeaPort, McKinney thanked everyone for their support as “we grow SeaPort into a far reaching, next-generation regional airline.” There was no suggestion here of a stark division between the two companies.

Executive’s objection highlighted another problem that arose with SeaPort’s EAS contracts. The DOT found that while SeaPort collected the passenger facility charges, one of the fees you’ll find at the bottom of your ticket, in late 2015 and early 2016 it had “failed to remit those funds to airports as required.” Following an investigation, DOT fined SeaPort again, this time for $40,000.

As ADI responded to Executive’s objection, SeaPort had a lawsuit to contend with from one of its vendors. On January 28, Caravan Air sued SeaPort seeking overdue monthly payments for one of its aircraft that had been leased since the previous April. Caravan claimed an amount due greater than $75,000. In addition to the monetary losses, the company sought the immediate return of its airplane. 

And the hits kept coming. On February 5, two more companies filed objections with DOT to ADI’s scheduled service approval. The objection of Sun Air Express was based on SeaPort’s failure to maintain those essential air service routes as directed by DOT, “leaving communities stranded without air service.” It directed its concern at ADI/Aerodynamics due to their common ownership and management which Sun Air claimed had “little regard for compliance with the Department’s regulations.”

The second company, JA Flight Service, (JAFS) was owed two months of outstanding aircraft lease payments from SeaPort. JAFS also noted “significant issues with the quality and documentation of the maintenance of the [leased] aircraft.” The company claimed SeaPort had approached them in September 2015 asking to cancel its existing leases, as “SeaPort intended to stop providing EAS service and ‘might file bankruptcy’.” An agreement was signed between the two companies in October to return the aircraft yet continue the contracted lease payments as the EAS routes (which by then were operated by Executive Express) were still maintained. By February however JAFS believed that SeaPort had been used “for receiving revenue from [DOT]” while willfully failing to pay the vendors who generated that revenue. All of the objecting companies alleged that funds were shifted from SeaPort to ADI/Aerodynamics as it neared scheduled service approval. In essence, SeaPort was being used to sustain ADI/Aerodynamics, with SeaPort’s customers and vendors paying the price.

The end of one runway, the start of another

The same day the latest ADI objections were received, SeaPort announced it was filing for Chapter 11 protections and also that McKinney had resigned as CEO and president. The company vowed to rebuild but that summer it was hit with a significant FAA violation. On Aug. 4, 2016, the agency announced it was proposing a half-million dollar fine against the airline for “allegedly operating three single-engine Cessna Caravans when they were not airworthy.” 

Tim Sieber, who succeeded McKinney as President at SeaPort, said the violations dated to 2014 and the responsible parties had been fired. The FAA was unmoved by SeaPort’s requests for leniency however and the violation stood. With the company in the throes of bankruptcy, the penalty was later reduced in a settlement to $100,000, according to the FAA. Along with DOT, Executive Express Aviation, Caravan Air, JAFS and others, the FAA was listed as being owed six figure amounts in the trustee’s list of SeaPort’s approved creditors. 

When all was said and done, the total due from the company to 200 individuals and businesses was over $10 million.

As SeaPort subsequently slid into Chapter 7 liquidity in September 2016 , McKinney moved on. After becoming the president of Mokulele Airlines in Hawaii, he found himself in the midst of familiar territory, managing a Part 135 operation with single-engine aircraft and low-time pilots in pursuit of Essential Air service Contracts. Everything got even more familiar when Southern Airways bought Mokulele in February 2019 and named McKinney President of Southern’s Pacific Operations. That same year he was brought on as a co-founder and president of FLOAT Shuttle. The initial plan, according to McKinney, was that Mokulele would provide several aircraft and flight crew to FLOAT. This did not come to pass however and Southern ended up selling the Executive Express Aviation Part 135 charter certificate to FLOAT and operating its flights before FLOAT suspended operations and its founders moved on to Ravn.

According to a July 28 press release from Southern Airways, the large commuter has no intention to involve itself in Ravn’s future. “Southern has no plans now or in the foreseeable future to expand to the state of Alaska,” stated Southern President Stan Little. 

Without Southern behind him and with only FLOAT’s very limited business past to review, it is primarily McKinney’s record with SeaPort and Wings of Alaska that must be surveyed for clues to his future performance with New Ravn. While McKinney certainly did extricate himself from SeaPort just as the bankruptcy was filed, his participation as CEO and president in all the decisions that led up to it can not be disputed. Further, in its own lawsuit filed against McKinney in May 2016, SeaPort declared that he was well aware of the company’s precarious financial situation. According to the lawsuit, McKinney gave the company notice of his pending resignation “on about January 19” and that “while acting in his role as president, McKinney participated in the board meeting of SeaPort in which the board voted to file for bankruptcy.”

When FLOAT Shuttle’s purchase of Ravn’s assets was announced on July 9, the company struck a positive tone, asserting that flights would begin in about a month. Since then, as the FAA and DOT have shown no signs of rushing the certificate review process, McKinney has been more tempered but still hewed to an optimistic timeline. In the recent KCUB interview he said they are now hoping for flights in “early September.”

Meanwhile, SeaPort’s decline is available for anyone to research online.  A deep dive into all the twisted strands of lawsuits, violations, fines, canceled service, financial devastation and the damning NTSB probable cause assessment shows that everything about this company leads back in one direction: poor management. The history of both the company and its CEO and president is ready to be studied by anyone; what remains to be seen is how much of Rob McKinney’s unsuccessful SeaPort experience will be duplicated at Ravn.