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.
In the past year, as Congress has wrangled over how much money and what kind of programs to make available to small businesses for pandemic relief, it has become increasingly evident how difficult it is to find out who is getting how much funding and, also, how effective the government will be in making sure those funds are spent in the appropriate way. In Alaska, there have been substantial funds received by certain companies via loans through the Payroll Protection Program (PPP) and grants from the aviation-focused Payroll Support Program (PSP). In the top three of both programs sits Corvus Airlines, recently part of the Ravn Air Group, and now operated by its new owners as New Ravn. Corvus has managed to receive more money than airlines that have operated successfully in Alaska for decades, and, indeed, appears to be the largest recipient of federal pandemic-related funds in the entire state.
Ravn blamed its April bankruptcy filing on the Covid-19 pandemic, citing early on a “90% reduction in passenger revenue bookings” due to the virus. A review of the Bureau of Transportation (BTS) statistics does not show such dramatic losses, however. Here is a comparison for passenger stats for Ravn’s three scheduled airlines between those two quarters:
|Airline||1st Quarter 2019 Passengers||1st Quarter 2020 Passengers|
|Total Passengers Flown||148,432||90,406|
*After the crash of PenAir flight 3296 in October 2019, PenAir no longer flew to Unalaska which contributed to the reduction of all of its quarterly number.
The difference in passenger numbers between the two quarters reflects about a 39% drop in traffic. It is possible that Ravn was looking ahead at future reservations when it claimed the 90% drop, although there is no way to have predicted that early in the pandemic what the future would hold. BTS statistics also provide freight and mail figures which illuminate just what was going on overall with Ravn, and especially Corvus, when the pandemic began.
|Airline||1st Qtr 2019 Freight (lbs)||1st Qtr 2020 Freight (lbs)|
|Airline||1st Qtr 2019 Mail (lbs)||1st Qtr 2020 Mail (lbs)|
By every metric, Corvus saw a dramatic downturn between the two quarters and a review of its third and fourth quarter 2019 figures show it was on a downward trajectory over that period as well.) Meanwhile, Hageland and PenAir were in more manageable shape in 2020, especially Hageland.
On April 3, two days before declaring bankruptcy, Ravn applied for a grant from the Payroll Support Program. According to court documents, it requested $19.8 million in relief under a passenger application for Corvus and $16.6 million under a cargo application for Hageland Aviation. Ravn then parked its fleet and laid off almost all of its employees.
On May 14, the PSP applications were conditionally approved and on June 5, agreements were sent to Ravn for signing: a grant of 76% of the requested amount ($15,048,000) for Corvus and the full amount for Hageland. At about the same time, a debtor’s list with over $90 million in outstanding bills was accepted by the bankruptcy court. In the midst of all these financial maneuverings, other air carriers statewide, such as Alaska Central Express, Grant Aviation, Bering Air, Wright Air Service and Ryan Air, were busy building new route maps to accommodate Ravn’s former customers. The ailing company then issued a press release announcing their sudden cash windfall.
The June 17 press release stated that Ravn would receive $31.6 million in federal funds. Dave Pflieger, Ravn’s President and CEO, jubilantly declared that, “Given this news, and the fact that we now have a number of interested, enterprise-wide bidders who want to buy the entire Air Group and its three airlines, we remain optimistic that we will be able to maximize creditor recoveries, exit Chapter 11 protection, and ensure that Alaska’s largest and most vital regional airline can resume operations later this summer.”
(Ravn also owned a fourth airline, Frontier Flying Service.)
Ravn quickly moved to obtain some of the PSP funds for immediate use. After receiving approval from the bankruptcy court on June 23, Ravn was granted $2,508,963 to Corvus and $2,769,521 to Hageland for payment of “remaining employees’ salaries and benefits.” That same day the court clarified that the PSP agreement mandated certain requirements, including that Ravn would not terminate or furlough any employees “between the dates of the PSP Agreements and September 30, 2020”. Of course by the time the agreements were signed, almost all of Ravn’s employees had already been laid off.
On July 9, Corvus and PenAir were sold to California-based Float Shuttle, one day after a scheduled auction was canceled which effectively shut out two other groups that were prepared to offer substantially more money. In addition to the two operating certificates and several aircraft, CARES Act funds were also part of the surprise deal.
In the sale documents, Float was assigned “all right, title, and interest of the Seller” to any monies associated with the CARES Act (excluding those with respect to Hageland Aviation). As posted on the Department of Treasury website, $15,489,546 went to the new owners in August. This was slightly more than the amount approved for Corvus on May 14. (It is unclear if it included the $2.5 million of relief money for the company previously released to Ravn in June.) What is certain, is that the total was the third highest amount of PSP funds awarded to an Alaskan aviation business in 2020, behind only Northern Air Cargo and Lynden Air Cargo.
The PSP funds, which are aviation industry-only grants, are meant to be used for employee wages, salaries and benefits. This differs from PPP loans that are available from the Small Business Association to any industry and can be used, generally, for payroll, mortgage interest, rent/lease and utilities. According to a database on those funds obtained by the Washington Post, Corvus was approved on August 6 for $7,398,947 in support of 500 jobs. It was the third highest PPP fund recipient in Alaska, behind Kakivik Asset Management and the Arctic Slope Native Association. Thus, altogether there was at least $22,888,493 in federal coronavirus relief aid directed to Corvus Airlines from the federal government in 2020.
Following Ravn Air Group’s announcements in June of the initial CARES Act awards, there has been little mention of funding for the company’s former airlines in the press. It has come up in legal correspondence in the Department of Transportation (DOT) docket however, as the new owners sought approvals to obtain Corvus’s previous Essential Air Service contracts, route structure and scheduled service approval. Other Alaskan air carriers and the US Postal Service raised concerns with DOT about the airline’s reliance on federal funds, and what such dependence meant for its financial fitness. In a November response to these concerns Corvus noted receipt of “over $9 million in PSP and PPP Cares Act funds.” This figure undervalues its aid by almost $14 million.
Another question in all this is what happened to the money promised to Hageland Aviation. The Treasury Department had approved $16.6 million in PSP funds for Hageland, but the airline does not appear as a recipient in either the PSP or PPP databases and in its sale last fall to Monocoque Diversified Interests there is a stark reference to the CARES Act. That sales agreement states, “To the extent that Buyer believes it may be eligible under the Payroll Support Program…..the Payroll Protection Program or any similar financial assistance program for employees under the CARES Act, Buyer shall be responsible for preparing and submitting any required applications.” [Italics mine.]
In other words, unlike Corvus, there was no CARES Act money in the Hageland sale. This is particularly perplexing as BTS statistics on passengers, freight and mail show how Hageland, with its massive mail figures, was the significant economic engine for Ravn:
|2018||2019||Quarter 1 2020|
|Corvus Airlines||407,328 pax||555,225 pax||41,494 pax|
|10,823,596 lbs frt||2,918,900 lbs frt||139,299 lbs frt|
|1,816,335 lbs mail||1,578,647 lbs mail||134,808 lbs mail|
|Airline||2018||2019||Quarter 1 2020|
|Hageland Aviation||243,924 pax||251,344 pax||31,219 pax|
|4,192,474 lbs frt||3,709,325 lbs frt||461,616 lbs frt|
|28,184,048 lbs mail||27,503,211 lbs mail||3,855,489 lbs mail|
(PenAir, which Ravn was in the process of merging with Corvus prior to the crash of flight 3296, was far behind both airlines statistically.)
Beyond the CARES Act funds there was another issue for Hageland’s new owners. Like Float, Monocoque also purchased aircraft with the company but the FAA removed them, eight Piper Navajos, from Hageland’s Operations Specifications prior to the sale. This has caused delays for the new owners as they initiate service. The removals were done, according to the agency, because Hageland had not been an active company since April. That determination is contrary to the Treasury Department’s decision to award Hageland PSP funds in June, and Ravn’s assertions that month, both publicly and in court documents, of Hageland as a viable entity. It also raises questions as to why Ravn maintained personnel in Corvus’s regulatory positions and yet, apparently, neglected to do the same for Hageland, its larger and more active/successful partner.
Finally, there is PenAir. The venerable airline, founded in 1955 by Orin Seybert was sold, in bankruptcy, to Ravn Air Group in 2018. At the time, Pflieger heralded the acquisition as a “big win,” saying, “the two companies coming together, provides an incredible opportunity to better connect Alaska, with the ability to provide broader, more reliable, and more consistent service.”
PenAir does not appear in either the PSP or PPP databases and there is no evidence of attempts to obtain funds on its behalf. Since its purchase by Float there has been little mention of PenAir in the press. (PenAir’s fleet of Saab 2000s were not part of the sale, as they were leased aircraft.) The FAA confirmed in January that there is a reason for this silence; on October 15 its air carrier certificate was surrendered to the agency by the new owners. After 65 years in business, PenAir no longer exists. According to the FAA, “If Peninsula Aviation Services, Inc., subsequently decides to reinstate operations, they must apply and qualify for a new certificate.”
Why it matters
Ravn Air Group was two days from formally applying for bankruptcy protection when it filed for CARES Act funding. From the moment it first parked company aircraft in late March, and subsequently grounded its entire fleet and laid off its employees in the first week of April, the company has resolutely maintained that Ravn’s financial troubles were brought on by the pandemic. But an analysis of the passenger, freight and mail statistics for all three of its active airlines raises questions about Ravn’s financial stability going into 2020, especially in regards to Corvus Airlines, which showed the sharpest reductions in service prior to the pandemic but went on to receive over $22 million in federal funds.
The lack of support for Hageland Aviation is particularly puzzling as PSP funds were assigned early on to the bush carrier only to be dropped at some point in the summer. The large reward for Corvus in the absence of any funds for Hageland, and the questions that still remain over the private sale of Corvus at such a sharply reduced price to Float Shuttle, makes Hageland’s far different fate that much more confusing to comprehend.
Finally, it is worth noting that while Corvus has been through bankruptcy, sale, and is yet to return to service at a level comparable to years previous, it received only $146,574 more in federal funds than Alaska Central Express, Grant Aviation, Bering Air, Ryan Air and Wright Air Service combined. Their comparative financial fitness and ability to navigate the pandemic, like so many other air taxis and commuters in Alaska, clearly had nothing to do with accessing value for CARES Act funds. In that regard Ravn got lucky; if those things did matter, Corvus likely would not not have ended up as the Alaskan air carrier at the top of the list for government funding.