Sun Country files for Chapter 11 bankruptcy protectionby Martin Moylan, Minnesota Public Radio
Mendota-Heights Sun Country Airlines filed for Chapter 11 bankruptcy today. The second largest airline serving the Twin Cities said it had no choice because of the legal and financial woes of its parent company, Petters Group Worldwide. Petters is under federal investigation for a scheme that allegedly bilked investors out of more than $1 billion.
Sun Country CEO Stan Gadek said bankruptcy is the best course for the airline right now. If the airline had not filed for bankruptcy, Gadek said, it would likely have gone into receivership. In that case, management would have lost control of the airline to a trustee, and Gadek said the airline could have ended up being liquidated to satisfy creditors.
Filing for bankruptcy, he said, allows the airline to continue operating its schedule normally.
Gadek argues Sun Country can be a viable carrier if it can get through the usually slow final three months of the year and attract new investors.
"We're not in bankruptcy as a result of a failed business model," Gadek said. "Our business model has been functioning quite well. We made money in July and August. We were having a very good September and the world changed a week and a half ago. We're having to seek protection under Chapter 11 as a result of events that were totally beyond our control."
Petters' legal woes meant Sun Country couldn't turn to the parent company for loans anymore to help it through rough spots.
Gadek said the bankruptcy gives the company a chance to reorganize, find new investors and establish an identity apart from the Petters Group. And, he said, the bankruptcy gives more certainty to vendors, creditors and travelers.
"Being in Chapter 11 now removes a lot of uncertainty for customers because they know they are familiar with airline bankruptcies," Gadek said. "Most recently Northwest Airlines here in the Twin Cities, and they know airlines survive bankruptcies."
Sometimes they do. Sometimes they don't.
George Wozniak, owner of Hobbit Travel and a minor investor in Sun Country, said bankruptcy was the best option for the airline. He said the protection from creditors will hopefully preserve an airline that has historically forced airfares down in the Twin cites market.
"All we hear are just wonderful things about their service, about the employees and their on-time performance," Wozniak said. "Really when you look at it from the standpoint of the minnesota traveling public, it's just been a terrific little airline and that's what we all want to have continue."
The Metropolitan Airports Commission is Sun Country's biggest creditor, but airports commission spokesman Patrick Hogan said the commission also feels a bankruptcy reorganization may be the best thing for the airline and airport.
"Our hope is it will have a positive outcome," Hogan said. "Obviously, we hate to see any of the airlines here have to file bankruptcy. But in the end, if it can help them get their fiscal house in order and come up with business plan moving forward that creates a sustainable airline that could be the best thing."
As it reorganizes in bankruptcy, Sun Country will seek new investors.
But aviation consultant Darryl Jenkins believes Sun Country will have a hard time attracting money, given the state of the airline industry and the nation's economy.
"The last couple of years, it's been very difficult to raise money for airlines," Jenkins said. "For these guys I think it will be particularly tough. I wish them well. If they can do it, God bless them. They've done an incredible job but this is a very difficult market for financing anything."
At the Minneapolis St. Paul International Airport, there was little sign of panic among Sun Country customers, especially those who recalled Northwest Airline's relatively hassle free bankruptcy.
Traveler Irv Schoppe has flown Sun Country a few times. He said he doesn't have travel plans on the carrier in the coming months, but he would not hesitate to book a flight just because of the bankruptcy.
"We have to do business," Schoppe said. "With business, you're basically taking chances. I don't look at this as a risk, I'm comfortable with it. I believe they're going to be around for a while anyway."
Sun Country's is just the latest in a long string of bankruptcy filings in the airline industry. The question is whether sun country will fly out of it like Northwest, Delta and United did, or disappear as many smaller carriers have in recent years.
- All Things Considered, 10/06/2008, 5:20 p.m.