Originally created 09/05/97

Air South granted reprieve

COLUMBIA -- Air South has two more weeks to find money to resume operations, possibly as a charter carrier, because a principal creditor Thursday agreed to delay trying to repossess the airline's remaining planes.

GE Capital Aviation Services Inc. said it would wait until Sept. 23 before pressing its claim on the five leased Boeing 737 jets.

"We don't want to foreclose" on the airline's options, Mary Grace Diehl, an attorney for Stamford, Conn.-based GE Capital, said at a bankruptcy court hearing.

Three-year-old Air South suspended operations and filed for Chapter 11 bankruptcy protection on Aug. 28, reporting $67.4 million in liabilities and only $11.5 million in assets. The airline now hopes to run a charter service so it can raise money to resume regular operations, its lawyer, Rick Mendoza, said.

"Truthfully it is not going to be an easy thing to arrange the reorganization, we're not trying to pretend otherwise," he said. "We believe the company does have a reasonable prospect of reorganization."

Mr. Mendoza said he did not know how much money the airline would need to resume operations. Court approval would be required before any charter flights, he said.

When Air South suspended operations, it was flying about 4,000 passengers a day on routes to cities in South Carolina, Georgia, Florida and Virginia, as well as service to Chicago and New York City.

Air South has agreed to keep insurance on the planes and perform maintenance on the aircraft, Mrs. Diehl said.

GE Capital initially was concerned the jets would deteriorate from lack of use, she said. Since the bankruptcy petition was filed, the company has been able to evaluate the aircraft and Air South's ability to maintain them, Mrs. Diehl said.

Three of the planes are at the Columbia Metropolitan Airport. Their engines will be started and they will taxi around the airport periodically during the next two weeks.

A plane in Miami awaits an engine being repaired in Sweden, while the fifth jet is undergoing a required maintenance inspection in Brunswick, Ga. Work will continue on both those planes.

A group of company executives working without pay is seeking funding and contracts for charter flights, said Tom Volz, Air South's marketing vice president. There are talks with a number of parties, he said, but he would not identify them.


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