Company Scrambling To Avoid Bankruptcy

Former Vice-President Al Gore and other high-profile fractional owners of Nashville-based FractionAir aircraft won't be getting off the ground anytime soon, according to NashvillePost.com. The four-year-old fractional jet service couldn't fly today even if it had airworthy aircraft and the cash to fill 'em up with Jet-A.

In early May, the financially troubled company voluntarily surrendered its Federal Aviation Administration (FAA) authorization to operate as a fractional business, according to Kathleen Bergen, an FAA spokeswoman in Atlanta. Then, in late May, FractionAir voluntarily "put on deposit" a certificate that allows it to operate as a charter service. That certificate is good through the end of August.

In a meeting with creditors on Thursday, June 22, Galen Capital Group, LLC announced plans to restructure the outstanding debt of FractionAir, a wholly owned subsidiary of TEDA Travel Inc. "FractionAir has completed the first stage of a potential restructuring plan with its creditors and will be presenting a formal plan in writing for adoption by all creditors during the next 30 days."

Meeting attendees/creditors were told the company owed $19.5 million in unsecured and secured debt but had no assets. The company owes more on the four airplanes left in its fleet than they are worth. Only one of the four is airworthy, but it is in maintenance. A fifth plane was repossessed.

The bankruptcy option FractionAir seems intent to avoid is a Chapter 7, or complete liquidation, in which all creditors involved-Galen Capital included-would lose most or all of their investments in the flopped firm

What the Galen announcement omitted, according to the NashvillePost.com expose, is that William P. Danielczyk, Galen Capital's chairman, is also the chairman of FractionAir and TEDA, not just a capital contributor of the troubled firm.

Nor did it reveal that Galen's vice chairman and managing director, Michael Kane, is also FractionAir's chief financial officer. "TEDA is merely a shell company that FractionAir merged with last year as part of a soon-ditched plan to go public," wrote the Post's Richard Lawson.

Even if the company gets its financial house in order, it would still have to contend with the FAA before taking to the skies. Bergen said the FAA will review the company's status at the end of August.

As for Al Gore? If he loses his plane, at least he's still got "his" Internet to play with...

FMI: www.fractionair.com (under construction), www.galencapitalgroup.com, http://www.nashvillepost.com/news?search_string=fractionair