Bankruptcy for Direct Air (Update: $9.6m in federal fines)

Photo © 2010 J. Ronald Lee.

Update August 22, 2012: Direct Air is facing up to $9.6 million dollars in federal fines for canceling, which stranded passengers across the country. 

Direct Air canceled 144 flights in March 2012 due to unpaid bills, which included fuel costs. 

Check out the full story over at The Sun News and get up to date with all the Direct Air info over on our Topic Page.

Update March 23, 2012: The trustee in the Direct Air bankruptcy has requested the bankruptcy be coverter from chapter 11 to chapter 7.

U.S. Trustee William Harrington who is the backruptcy trustee has filed a conversion request Friday that outlines the millions of dollars Direct Air owes and revealing that the remaining employees continue to accumulate liabilities for the company.  The coversion from chapter 11 which allows the company to reoganize to chapter 7 would allow the company to sell company assets to pay off it's debt, but would also mean the end for Direct Air.

In the filling made by Harrington it said:

“In light of the fact that the Debtor [Direct Air] has ceased operations, and is apparently incurring post-petition liabilities, the UST [United States Trustee] believes that it is unlikely that the Debtor will be able to file a confirmable plan of reorganization,”

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and it goes on further to say:

 The fact that the Debtor is not operating yet continues to incur administrative costs is cause for conversion in this case....Moreover, the fact that the Debtor’s management team resigned on or about March 12, 2012 raises serious issues as to the continued management of the Debtor, and is also cause for conversion of the case.

The Sun News has a full write up which can be found here

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Update March 18, 2012: As mentioned in our first report, the future of Direct Air rested largely with the chapter of bankruptcy they intended to file. 

We've since learned that Direct Air is proceeding with Chapter 11 which has become a popular choice since the economic downturn. Chapter 11 signals that the company is upside down in their debts but not totally insolvent and have hopes of returning to positive cashflow if given relief from their debts. Amanda Kelley of The Sun News has a detailed write-up on Direct Air's current situation. Read more here.

Direct Air had become such a integral part of Myrtle Beach area tourism, that the Myrtle Beach Area Chamber of Commerce has scrambled to correct their marketing just before the peak tourism season. The Sun News has more information here.

Finally, what do you do with those Direct Air tickets? It may not be as easy as calling customer service. According to the Lakeland Ledger, you'll need a receipt of some kind– a credit card purchase record will suffice. You have to request a refund from Direct Air by writing to the company at 1600 Oak Street, Suite B, Myrtle Beach, S.C. 29577, with copies sent to the company's escrow depository bank, Valley National Bank, 1455 Valley Road, Wayne, NJ 07470, and to the holder of its surety bond, Platte River Insurance Company, Alejandro Navarro, Attorney-in-Fact, 700 A Lake Street, Ramsey, NJ 07446.

If you're stuck in a round trip, you should call 1-855-888-8090 to sort out a way home.  

First Report: You'd have to be pretty insulated from the local news to not have heard about Direct Air yesterday. Aside from their current business woes, the sudden cancellation of service could mean even more turbulence for the troubled airline.

As the story quickly evolved yesterday from, "we didn't pay our fuel bill" to, "we're evaluating strategic alternatives" it became more clear that the company is in dire straits. The Sun News has more details about how things unfolded and what may come in the future. Read that here. While Myrtle Beach Direct Air still maintains that this is a temporary outage and services will resume in two months, it is likely a bide for time while the company determines which chapter of bankruptcy they will take

Aside from whatever business problems they were already having, WPDE reports that Direct Air is now open to class action lawsuits due to the short notice in which they cancelled scheduled flights which left some passengers stuck without a return trip home. More details from WPDE are here.

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