Bankruptcy court to rule this month on Shuttle America
Prospective buyer would assume airline's debts

By Davis Bushnell, Globe Correspondent, 11/4/2001

BEDFORD - Shuttle America's future probably will be charted Nov. 29 by the
US Bankruptcy Court in Hartford, which is set to rule then on the airline's
reorganization plan.

The court last Tuesday approved a disclosure statement by Shuttle America,
which inaugurated daily service Oct. 24 from Hanscom Field to Philadelphia
and Trenton, N.J., as US Airways Express.

The Windsor Locks, Conn.-based airline, which began serving Hanscom in
September 1999, filed for Chapter 11 bankruptcy protection in April.

Under the proposed reorganization plan, Shuttle America would be sold for
$1.4 million to Shuttle Acquisition, a unit of Wexford Capital of Greenwich,
Conn., a private equity company formed seven years ago.

The new owner would be responsible for settling Shuttle America's secured
debts of $11.2 million and unsecured debts of $12 million.

On the plus side, Shuttle America said in court papers that it has received
about $291,000 from the federal government as part of its financial relief
package for the airline industry following the Sept. 11 terrorist attacks.

The proposed financial arrangements aside, the big question, according to
airline-industry analysts and others, is whether Wexford, which is little
known outside the industry, would be able to provide enough money and
management skill to keep the regional carrier flying for a sustained period.

Also up in the air is the issue of how long US Airways Express will be in
the mix.

''I can't comment on any future relationship with Shuttle America,'' said
David Castelveter, spokesman for US Airways, based in Arlington, Va.

Wexford, which stated in Bankruptcy Court filings that it has more than
''$900 million of assets under management,'' owns Indianapolis-based
Chautauqua Airlines Inc. and pumped $7 million into Midway Airlines Inc. of
Morrisville, N.C., which is also in bankruptcy.

Despite Wexford's asset claims, two leading venture-capital specialists,
Patrick Gray Sr. of the Boston office of PricewaterhouseCoopers and Howard
E. Cox Jr. of Greylock Management Corp. of Waltham, said they had never
heard of the Greenwich business. Cox is also chairman-elect of the National
Venture Capital Association.

''If Wexford invests'' in Shuttle America, ''they must see something [in the
airline] that we don't,'' said Michael Boyd, an airline analyst from
Evergreen, Colo.

Wexford's founders, Charles E. Davidson and Joseph Jacobs, did not respond
to phone inquiries about their company's operations.

The Massachusetts Port Authority, owner-operator of Hanscom Field, has been
told, however, ''that the Shuttle America team is committed to Hanscom,''
said Richard Walsh, a spokesman.

Regardless of the flag that Shuttle America flies under, its longtime
opponents, like the historical preservation group, Save Our Heritage of
Concord, say they'll press on with their campaigns against commercial
aviation at Hanscom.

One of Shuttle America's largest creditors, the Connecticut Development
Authority, is waiting to see how much of its $3 million loan will be repaid,
said David Willis, senior vice president of special projects.

Other creditors owed substantial amounts, according to court documents, are
Bombardier Services Corp. ($4.4 million), which leased 50-seat Bombardier
Dash 8 turboprop planes to Shuttle America, and aircraft engine manufacturer
Pratt & Whitney Canada ($2.4 million).

For the time being, US Airways is providing ''a safe harbor for Shuttle
America, which is fortunate to have that contract,'' said Boyd, the
airline-industry analyst.

US Airways, which is saddled with its own losses, has a marketing agreement
with Shuttle America, which is one of 10 regional carriers operating as US
Airways Express.

All the planes have ''US Airways Express'' on their sides, with only small
decals identifying the operators.

Although US Airways spokesman Castelveter would not reveal details about the
agreement, Shuttle America spokesman Mark Cestari said US Airways provides
ticketing and baggage services and gets a cut of all fares. Fares, he said,
range from $99 (advance) to $299 (walk-up).

Shuttle America supplies the flight crews for six daily nonstop flights
between Hanscom and Trenton, and five nonstop flights from Hanscom to
Philadelphia, Cestari said, noting, however, that Wexford's Chautauqua
Airlines provided the aircraft and pilots during the Columbus Day weekend
because of additional demand.

Wexford is also providing ''interim financing'' for the three new Dash 8
planes, Cestari said.

''Business has been good, counter-cyclical to what's been occurring in the
industry as a whole,'' he said, while declining to say how many people have
been flying to Philadelphia and Trenton on US Airways Express.

This story ran on page W5 of the Boston Globe on 11/4/2001.
© Copyright 2001 Globe Newspaper Company.
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