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April 16, 2012

Direct Air Shutdown Renews Questions Over Airport Future

The court-ordered liquidation of Direct Air leaves the future of commercial passenger flight at Worcester Regional Airport in doubt, and the airport possibly leaning more toward general aviation.

Until U.S. Bankruptcy Court Judge Melvin S. Hoffman sided with a U.S. trustee's motion to convert Direct Air's bankruptcy protection filing to Chapter 7 last week, the company had maintained that it hoped to fly again by May 15. It had abruptly halted all flights on March 13 and, two days later, filed for Chapter 11 protection, seeking to reorganize.

Attorneys for Direct Air had asked for either a two-week delay on Hoffman's decision to try to secure funding, or to deny the trustee's request. They argued that the company was making efforts to reorganize, including having had discussions with members of Congress whose constituents would benefit from the company's routes. Attorney Steven Fox said Direct Air officials had also been in talks with authorities at the airports it had served about restarting operations and were working to secure third-party funding. He said the company had acknowledged the U.S. Department of Transportation's investigation into the way Direct Air handled funds in the escrow account meant to protect customers, along with the abrupt manner in which it shut down operations.

Hoffman said the May 15 target date was unrealistic, given the deep financial troubles the company found itself in, including at least $10 million in missing funds from the escrow account, $25 million to $30 million owed to customers whose flights had been cancelled, and more than $9 million owed to various creditors.

According to a list of the Myrtle Beach, S.C.-based company's 20 largest creditors, Direct Air owes the Massachusetts Port Authority, which operates Worcester Regional Airport, nearly $85,000.

"(Direct Air) hasn't given me anything I can grab onto in terms of (a) strategy," Hoffman said.

Massport Remains Optimistic

Richard Walsh, assistant director of communications and marketing for Massport, said Direct Air's order to liquidate wasn't surprising and said he remains optimistic about the Worcester airport's future, despite having lost its only commercial passenger carrier.

"What Massport needs to show airlines is that there is a market at Worcester airport, and Direct Air showed us that. Their numbers increased every year and Worcester was one of their strongest routes," Walsh said. "We'll share the market data and we'll see where that takes us."

In 2010, the airport reported that Direct Air transported 71,014 people. In 2011, that number rose to 107,434.

Hope For A New Carrier

Janusz Golemo, owner of Worcester's Golemo Travel Service, said he was unable to book his clients' flights on Direct Air, but he'd like to see another carrier come in.

"I think there's substantial demand. Direct Air, from what I heard, was doing pretty awesome out of Worcester, but they just dropped the ball," he said.

Airline industry analyst Bob Mann of R.W. Mann and Co., said he doesn't think what he calls the "Direct Air experiment" will have a major impact on another airline's perception of the airport.

"Trends in the local economy are far more indicative," he said via email. "Network planners will continue to look at the Worcester area's revenue potential … and make network planning and scheduling decisions based on that information."

Independent airline analyst and consultant Robert Herbst of, said Massport's best bet for getting commercial flight out of Worcester would be to target small carriers like Allegiant Air. "The major carriers, they've already got large facilities and operations," he said.

But Herbst is not optimistic about even small carriers coming to Worcester.

"Direct Air went out of business because they weren't making enough money to cover their expenses, and they had the lowest expenses of any airline in the industry," he said.

Study Commission Sought

In another development, the Republican leader in the State Senate wants a commission to study alternatives for the airport, including the possible sale of the property. Bruce Tarr, of Gloucester, wants a seven-member panel to study "the feasibility of the continued operation of the airport in its present form," and ways to maximize its benefits while reducing operating costs. Tarr wants the commission to conduct a cost-benefit analysis to determine whether selling or leasing the airport property would be a good option.

Although Massport continues to seek commercial operators, Walsh said the addition of Bedford-based Rectrix Aviation as a fixed-base operator (FBO) will "be a catalyst to really attract general aviation."

Analysts agree it's a smart move for the airport. "A businessman or premium flyer, they will charter a fixed-based operator business," Herbst said.

He said it will give the Worcester airport more corporate buyers for flights, and Mann said that's a growing trend.

"Corporate/business aviation is growing faster than commercial/scheduled aviation. FBOs service those higher growing trends."

(Material from State House News Service was used in this report.)

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