After its parent company Silver Airways ceased all operations following a protracted bankruptcy during which it failed to bring in optimistic investors, regional Caribbean seaplane carrier Seaborne Airlines confirmed that it plans to continue running flights as it looks for its own investor.
The airline launched in 1992 had been running flights between St. Thomas and St. Croix in the U.S. Virgin Islands and Luis Muñoz Marín Airport (SJU) in Puerto Rico’s San Juan on two De Havilland DHC-6-300 Twin Otter seaplanes.
Operating in a smaller market where many residents have few options for flights to a larger city for their regular shopping and business needs, Seaborne Airlines looks like it will have more luck in finding an investor willing to see potential in the name and market demand despite the heavy debt.
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Seaborne calls Brazilian stalking horse bid ‘a huge step forward’
On June 19, Seaborne requested a local U.S. Virgin Islands court to authorize a quick bankruptcy auction that will allow it to not stop operations.
In court filings, Seaborne leadership revealed that it already had a stalking horse bidder willing to pay $200,000 in cash and take on its $625,000 in debt; local journalists later dug up that the bid came from a Brazilian low-cost airline that even put in a 10% deposit to prove serious intent to purchase to the bankruptcy court.
Related: Regional airline cancels flights, no bankruptcy
“This is a huge step forward,” Seaborne’s Executive Director of Operations Phil Lambrechts said in a statement to local press. “We’re encouraged that Seaborne has attracted interest from investors who not only want to preserve service in the U.S. Virgin Islands but help it grow. That’s not something we saw with Silver.”
The name of the low-cost carrier has not been revealed; the largest budget airlines in Brazil include Azul (AZUL) and GOL Linhas Aéreas (GOL) .
Foreign ownership laws and how this type of purchase could proceed
Such a purchase would also be subject to the U.S. Department of Transportation law that prevents more than 25% of an airline’s stock from being owned by non-American entities.
Given the Brazilian owner’s serious intent to buy, some analysts are speculating that ownership could be registered through an American affiliate or trustee while also keeping in place its current team of American executives (having a majority U.S. leadership is another of DoT’s requirements).
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If an airline can prove that the main stakeholders behind it are from the U.S., the DoT can on some occasions grant authorization for a foreign owner. The government agency has repeatedly renewed its exception for Samoa Airways — the parent company Polynesian Limited is registered in the United Kingdom while the faraway Polynesian territory is subject to U.S. laws.
“Ultimately, the U.S. Department of Transportation holds the final say,” business-to-business travel website Travel And Tour The World wrote of the bid. “The review process will examine not just paperwork but also the substance of control. Who is really running the airline? Who calls the shots? And who benefits from the revenue? If the Brazilian airline can convincingly demonstrate that its role is financial, not operational, it may clear the regulatory hurdles. But the spotlight is now on, and every detail will matter.”
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