The U.S. Federal Bankruptcy court in Anchorage accepted a motion Jan. 26 to allow Era Aviation Inc. to operate from its cash reserves for another month.
"Era will continue to operate until we have another hearing in February," said Era's attorney, Cabot Christiansen.
Era Aviation and Era Investment Group LLC filed for Chapter 11 reorganization bankruptcy Dec. 28.
Era will continue to operate from month to month through similar hearings until the court and the collateral lenders are satisfied that the reorganization is making progress, Christiansen said.
The investment group bought the airline in 2004. Court records show the sale of the operation was backed by Era Investment Group LLC, and the lender was CapitalSource Finance LLC of Chevy Chase, Md.
Era Aviation has released little information about the dispute between the airline and CapitalSource. The airline and its investors filed for bankruptcy after a 10-minute board meeting held Dec. 27.
Era Aviation ran into trouble with CapitalSource over whether certain financial benchmarks were met, according to Era officials.
"This is an extraordinarily uncooperative lender," Christiansen said. "They are a Boston Hedge Fund, it's difficult to determine what is driving this."
The attorney for CapitalSource, David Oesting, could not be reached for comment.
Calling this an unusual case because the lender cut off Era's cash flow, Christiansen said the airline is continuing to make its financial projections successfully.
Christiansen said that while Era had not met some minor details of the lending agreement, that the lender was being difficult.
"You don't send someone to the gas chamber because they got a parking ticket," Christiansen said. "This is just not making sense."
Traditionally, fewer people fly in the winter months than in the summer and fall, so the airline needs capital to support its 350 employees.
Christiansen said that he is confident that the reorganization would be accepted because Era is critical to the economic viability, and is a major transportation entity, for Southcentral and Southwest Alaska.
The final cash collateral hearing is scheduled for Feb. 14.
Rob Stapleton can be reached at rob.stapleton@alaskajournal.com.
