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August 23, 2022 – ExpressJet Airlines LLC (dba aha! Airlines) (“ExpressJet” or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case No.22-10787 (Judge TBD). The Debtor, a regional U.S. airline headquartered in College Park, Georgia*, is represented by Eric D. Schwartz of Morris, Nichols, Arsht & Tunnell LLP. Further board-authorized engagements include: (i) Eversheds Sutherland (US) LLP as special corporate and transactional counsel and (ii) Epiq Corporate Restructuring, LLC, as claims agent.
* The Debtor is 100% owned by ManaAir LLC (“ManaAir”) and ManaAir is jointly owned by KAir Enterprises LLC and MNBS Associates LLC. In January 2019, ManaAir, then jointly-owned by KAir Enterprises and United Airlines, purchased ExpressJet from SkyWest, Inc.
The Debtor's petition notes between 1,000 to 5,000 creditors; estimated assets between $10.0mn and $50.0mn; and estimated liabilities between $10.0mn and $50.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) the U.S. Small Business Administration ($10.0mn PPP loan claim), (ii) U.S. Department of the Treasury ($3.9mn CARES Act loan claim) and (iii) Skywest Airlines ($2.5mn disputed workers compensation claim).
Goals of the Chapter 11 Filings
According to the Greenlee Declaration (defined below), "Due to the financial difficulties explained above, the Debtor, in consultation with its professional advisors, has diligently evaluated a range of strategic alternatives to address its liquidity challenges. After a careful assessment, the Debtor and its professional advisors have determined that the best course of action to further the Debtor’s value maximizing efforts is to market and sell its Physical Assets.
Should a third-party investor want to acquire rights to the Debtor’s Certificate and associated intangible property, the Debtor would pursue a potential sale of the residual entity associated with that asset. Should that effort fail, the Debtor will simply liquidate its Physical Assets and confirm a liquidating plan."
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Greenlee Declaration”), John Greenlee, the Debtor's president, detailed the events leading to ExpressJet’s Chapter 11 filing. The Greenlee Declaration provides: “The Debtor historically was engaged in business as a 'regional air carrier,' providing flight services on behalf of other airlines under private label capacity purchase agreements using aircraft subleased from United. United and ExpressJet entered into an Amended and Restated Capacity Purchase Agreement dated January 22, 2019 (the 'CPA'), which set forth terms and conditions related to ExpressJet’s exclusive provision of regional flight services to United through December 2022.
On July 30, 2020, United informed ExpressJet of United’s intent to withdraw all aircraft from the CPA, eliminating all ExpressJet’s revenues. ExpressJet worked with United following receipt of this information to achieve an orderly return of all aircraft and related parts to United or United’s aircraft lessors. ExpressJet ceased revenue flight operations as of September 30, 2020, and its certificated authority to fly, granted by the U.S. Department of Transportation (DOT), became dormant after 30 days.
In the spring of 2021, ExpressJet reapplied to DOT for certificated authority to fly and thereafter regained such authority in late summer of 2021. ExpressJet then resumed commercial operations on October 24, 2021, as both an ad-hoc air charter provider and scheduled commercial airline under its own leisure brand aha! — short for 'Air-Hotel-Adventure' — centered at the Reno-Tahoe International Airport and flying to small West Coast airports. As described in more detail below, shortly before the Petition Date, the Debtor ceased all operations, including air charter and scheduled flight services, laid off a majority of its employees, and is in the process of returning its aircraft to lessors.
The Debtor’s principal objective in this Chapter 11 Case is to conduct an orderly liquidation of its remaining assets, which include valuable new and used commercial aircraft parts (the 'Physical Assets'). The Debtor intends to engage in an auction process to sell these Physical Assets, and will liquidate according to a chapter 11 plan of liquidation. Additionally, the Debtor possesses a list of approximately 1,300 furloughed pilots, (the 'Furlough List') and its FAA-issued operating certificate (the 'Certificate') that it also intends to offer for sale.
The Debtor has engaged in a robust marketing process in order to generate interest among potential plan sponsors and lenders. That process has not been successful to date, and therefore the primary objective of this case is to liquidate the Physical Assets and then pursue a plan of liquidation.
The Debtor’s bankruptcy case is largely a result of the three major issues that negatively impacted the Debtor’s business, revenues, financial condition and results of operations since the resumption of flying in October 2021: (i) the difficulty in scaling operations to spread overhead costs over revenues earned; (ii) lower revenue projections as a result of depressed travel demand during periods of new COVID-19 variants; and (iii) inflationary pressures, including cost escalations in fuel.”
The Debtor’s outstanding debt falls into two categories: Incurred and Due in the Current Year 2022 (“Current Debt”) and Incurred and Due in Previous Years (“Legacy Debt”). The Debtor’s Current Debt is $2.4mn consisting of $900k of unearned revenue and $1.5 million of outstanding payables. The Debtor’s Legacy Debt is $24.1mn.
The Debtor’s Legacy Debt totals are set forth in these categories:
a. $5.1mn of accrued executive incentive payments;
b. $2.6mn in outstanding payables;
c. Approximately $2.5mn in ascribed liabilities related to continued workers’ compensation claims;
d. $3.9mn as the 10-year loan portion of the $113.0mn received in 2020 under the CARES Act; and
e. $10.0mn as the 5-year loan received in 2020 under the Paycheck Protection Program.
About the Debtor
aha! is a leisure brand of ExpressJet Airlines. aha! seeks to provide travelers in smaller communities, many who have seen air service reduced over the past decade through airline mergers, with convenient, short, nonstop flights to high-quality destinations like the Reno-Lake Tahoe region. In addition to offering value-priced, nonstop flights, aha! is partnering with resorts, casinos and attractions to "bundle" value-priced vacation packages. www.flyaha.com
aha!, short for air-hotel-adventure, flies from 11 exciting cities throughout California, Washington, Oregon, and Idaho. Among the destinations connected nonstop to Reno-Tahoe are: Bend/Redmond, Fresno/Yosemite, Ontario/Los Angeles, Palm Springs, Santa Rosa/Napa Valley, and Spokane. All routes are operated with 50-seat Embraer ERJ145 regional jets.
About ExpressJet Airlines
ExpressJet Airlines operates Embraer ERJ145 regional jet aircraft and has more than 40 years of regional airline experience. ExpressJet, including its leisure brand aha!, is focused on providing travelers in smaller communities with convenient, short, nonstop flights to high-quality destinations. The company's services also include specialty charter flights and additional future routes.
Corporate Structure Chart
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