Update 4:30 p.m.: Sun Country files for bankruptcy protection
MINNEAPOLIS (AP) - Sun Country Airlines filed for Chapter 11 bankruptcy on Monday, just days after the founder of its parent company, Petters Group Worldwide, was charged in a multimillion dollar fraud investigation.
Sun Country plans to continue operating on its normal schedule, airline Chairman and CEO Stan Gadek said Monday.
Last week, Gadek said Sun Country was having cash flow problems and could not turn to its parent company for a short-term loan -- as it normally would during the slow travel period -- because of the federal investigation.
"We were forced to take this action as a result of recent events at Petters Group Worldwide," Gadek said in a statement Monday.
Petters Group founder Tom Petters faces federal charges of mail fraud, wire fraud, money laundering and obstruction of justice in what authorities say was a scheme to defraud investors out of more than $100 million that went on for years. Petters resigned before his arrest last week.
Petters Group became the sole owner of Sun Country last November, after co-owning the carrier since October 2006.
Ray Neidl, a stock analyst with Calyon Securities Inc., said he's not surprised by the Chapter 11 filing in these times of high fuel prices and uncertain credit markets. Neidl said roughly a half-dozen small airlines filed for bankruptcy last spring, and he saw Sun Country as one of the smaller, private carriers that would do the same in the fall.
The filing in U.S. Bankruptcy Court in Minnesota is for Petters Aviation LLC and its subsidiaries, including MN Airlines Inc., which does business as Sun Country Airlines.
Sun Country warned its employees on Thursday that they should be prepared for potential major layoffs or even a shutdown as early as Dec. 1. But the airline said it issued that letter to comply with legal requirements, and that it has no plans to shut down or slash its work force.
Still, earlier in the week, Sun Country told employees that half their pay would be deferred until after the first of the year.
Sun Country, based in Mendota Heights, Minn., has 858 employees during the regular season, and up to 1,110 workers during peak travel times. The carrier operates nine aircraft -- all 737s.
Sun Country flies to 10 cities year-round, including Las Vegas; New York; Orlando; Cancun, Mexico; and Los Angeles. It serves 18 cities on a seasonal basis, including Anchorage, Alaska and tourist destinations such as Mazatlan and Puerto Vallarta in Mexico.
Chapter 11 bankruptcy allows a company to reorganize its finances with protection from creditors.