The seller airline filed for $10 million federal Covid assistance days before filing for bankruptcy. The buyer received the assistance and a competitor tried and failed to force the buyer to return the money.
M&A Stories
April 21, 2022
Introduction:
During the pandemic, many businesses received federal COVID assistance, including an Alaskan air carrier that filed for bankruptcy protection after applying for $10 million in aid. The buyer acquired the seller’s business, along with the $10 million federal assistance, leading to a legal dispute with a competitor.
The Deal:
An Alaskan air carrier filed for $10 million federal COVID assistance and then filed for bankruptcy protection just two days later. The buyer purchased the seller’s business, which included the right to the federal assistance, and received an additional $20 million in federal COVID aid.
The Lawsuit:
A competitor of the buyer filed a federal lawsuit in the District of Columbia, claiming that the buyer’s post-acquisition actions in the Anchorage-Southwest Alaska passenger air transport market were anticompetitive. The competitor alleged that the buyer’s below-market fares were enabled by the federal COVID payments, hindering its own ability to enter the market. The competitor also claimed that the buyer refused to negotiate fairly regarding terminal subleasing, resulting in a lost business opportunity.
The Court’s Decision:
The competitor sought a court order to claw back the federal COVID payments from the buyer and prevent any further disbursements. However, the court dismissed the competitor’s claims, stating it lacked the authority to issue such an order.
This case is referred to as Air Excursions, LLC. v. Yellen, Case No. 1:21-cv-01769 (TNM), United States District Court, District of Columbia, (April 12, 2022.)
Conclusion:
The buyer capitalized on pandemic opportunities by acquiring the seller’s business and the federal COVID assistance, but a competitor’s attempt to force the return of the funds was unsuccessful. The case sheds light on the complexities and challenges faced by businesses during the COVID-19 pandemic.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
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