Petters Aviation, a subsidiary created to support owner Tom Petters' growing interest in scheduled and charter airline businesses, is poised to sell some assets in the wake of his recent arrest on federal fraud charges.
Jay Salmen, Petters Aviation president, said in an interview that he's interested in attracting a buyer for Southwest Aviation, a small charter carrier that Petters acquired for $5.5 million just a few months ago.
Salmen said that it's "too early to tell" whether there will be a Petters Aviation six months from now.
Petters Aviation holds about 85 percent of the stock in Sun Country Airlines. Both businesses filed for bankruptcy protection last week.
But it was clear in U.S. Bankruptcy Judge Robert Kressel's Minneapolis courtroom Tuesday that Sun Country and Petters Aviation intend to march through Chapter 11 on separate paths.
Michael Meyer, a Minneapolis attorney who was the lead counsel in the Mesaba Airlines bankruptcy case, will help Sun Country reorganize its debts. Meanwhile, Cass Weil, a lawyer with Moss & Barnett in Minneapolis, has become the attorney for Petters Aviation.
"This case was rushed a bit, to say the least," said attorney Brian Hall of Atlanta, referring to the Oct. 6 Chapter 11 filing. Hall represented Sun Country and Petters Aviation in the early days of their bankruptcies, but Meyer said each business now needs its own counsel.
Sun Country CEO Stan Gadek said recently that he wants to find new investors for the carrier. Petters, who remains in federal custody without bond, owns all the voting shares in Sun Country.
Court filings show that Sun Country wanted a $7 million operating loan from Petters around the time federal agents raided Petters headquarters Sept. 24.
Sun Country has been so strained for cash that employees are expected to work at half-pay through year's end. Gadek has pledged to make up the difference next year.
When he announced the pay deferral at the end of September, Gadek said he'd work without pay until the financial crisis subsides.
Gadek was hired in March to succeed Salmen, who had worked about a year as Sun Country's chief executive.
Petters Aviation, which also sells Airbus business jets, has had total revenue of more than $12 million this year.
In the fourth quarter of 2007, Sun Country had a net loss of $17.8 million on total operating revenue of $54.5 million. Last December, Salmen was paid a bonus of $250,000. He said it fell within the parameters of his employment contract, and it was for work he performed as both Sun Country CEO and head of Petters Aviation.
When Petters Aviation filed for Chapter 11, Salmen was being paid a base salary of $350,000 per year. A court order prohibits any Petters Aviation employee other than Salmen to be paid more than $10,950 for two weeks of work. Salmen's biweekly compensation was listed at $13,462.
But following the bankruptcy filing, Salmen said: "For the good of the cause, I will reduce my pay to the $10,950 per pay period." That amounts to a pay reduction of about 19 percent, which translates into an annual salary of $284,700.
Liz Fedor 612-673-7709