WORCESTER —
Massachusetts Port Authority officials knew as early as last summer that
Direct Air was flying on financial vapors, but, desperate to nurture
the only commercial air service in Worcester, the authority continued to
pump public money into the now-defunct charter service, records show.
Over the three years that Direct Air operated charter flights to Florida and South Carolina from Worcester Regional Airport, the company got more than $1.1 million in public subsidies including waived fees and $550,000 to cover marketing expenses, according to internal Massport emails and other records obtained by the Telegram & Gazette.
For example, the records show that Massport, which owns the Worcester airport, cut two checks totaling $55,850 to pay for a Direct Air radio and television advertising campaign on July 13, 2011.
At that time, Direct Air was roughly $60,000 and counting in arrears on its landing fees and terminal rent and had not made any payments to Massport for months at a time.
Days before cutting the checks to CBS Radio and Comcast Spotlight on Direct Air’s behalf, Massport Interim Chief Executive Officer David S. Mackey had sent an email to then state Secretary of Transportation Jeffrey B. Mullan about the charter service’s seemingly shaky financial condition, warning that “there is no question it is operating on a ‘shoestring.’ ”
A few weeks later, in early August, Mr. Mackey sent out another Direct Air update email to Mr. Mullan and other officials summarizing a “contentious” conference call with Ed Warneck, one of Direct Air’s owners and its public face as marketing director.
Mr. Mackey noted that, “despite repeated requests, Direct Air has failed to make any payments to Massport,” and that the charter service, based in Myrtle Beach, S.C., also had not been paying the company that handled its ground operations in Worcester.
Mr. Warneck grew irritated during the conference call that Massport was pressing him to pay up, according to the summary.
“Warneck also indicated that he would be meeting with his partners next week to discuss the Worcester service, and that he intended to raise the matter directly with the lieutenant governor,” Mr. Mackey wrote in his summary of the call.
In separate interviews this past week, Mr. Mackey, former state transportation secretary Mullan and Lt. Gov. Timothy P. Murray said that, while they were aware of financial and customer service problems with the charter service, they were floored when Direct Air abruptly suspended all flights on the evening of March 12 and then filed for bankruptcy in Worcester a few days later.
They noted that the charter service’s low-cost flights to and from Worcester were often full or mostly full and that many large airlines have struggled financially at various times.
“We had no inkling of their impending implosion, and I’ll remember that day for a long time,” Mr. Mackey said.
He defended Massport’s decision to continue paying marketing expenses for Direct Air despite questions about its financial viability, saying that maintaining the only commercial air service at the struggling Worcester airport was a top priority for him and the authority’s board. Direct Air also received a $300,000 grant from the Federal Aviation Administration to support the Worcester service.
Massport offers a similar package of fee waivers and marketing funds to attract new international carriers to Logan International Airport in Boston and the practice is common in the industry, officials said.
Print advertisements in the Telegram & Gazette and online banners at telegram.com were among the Direct Air marketing expenses paid for by Massport at various times. The Telegram & Gazette also is an unsecured creditor in Direct Air’s bankruptcy.
“You have to prime the pump. You try to get something going,” Mr. Mackey said. “But I’d be the first person to say that we’re walking a fine line out there. We’ve got to be responsible to ourselves too. We’re not really in a position to just be giving money away for any airline.”
Asked if, in hindsight, he felt public money was wasted in an ultimately futile attempt to prop up a carrier that wasn’t viable, Mr. Mackey started to speak and then paused before answering.
“We did not anticipate, expect or plan that it was going to end the way it did,” he said. “We needed to nurture it along with Massport money, and there was an FAA grant too.”
Mr. Mackey said he’d do the same for another carrier in the future if necessary.
He and other Massport officials learned of Direct Air’s stunning collapse, which stranded thousands of passengers and derailed vacation plans at the height of the spring break travel season, from news reports the following morning.
State Secretary of Transportation Richard A. Davey, who had succeeded Mr. Mullan in September, emailed Mr. Mackey that afternoon asking for additional information. “When you have further update, let me know. LG is anxious,” Mr. Davey wrote, referring to Mr. Murray, the lieutenant governor.
Mr. Murray, a Worcester resident and former mayor of the city, had appeared at press events with Mr. Warneck touting Direct Air’s service from Worcester. They also had met privately several times to discuss the service, most recently in January, when Mr. Warneck brought the company’s new investor and majority owner, Hank L. Torbert, to the Statehouse to meet Mr. Murray.
Massport officials put together a briefing paper for Mr. Murray in advance of that meeting. The briefing states in part: “Direct Air has a history of late payment for services and lease agreements. At present, they are in arrears with Massport for rent and fees that have been charged since the waived period ended in February 2011.”
The briefing put the past due amount at $85,000, up $24,000 from the figure cited in emails from the previous summer.
Mr. Murray said in an interview that Mr. Warneck and Mr. Torbert presented an upbeat assessment in the January meeting of Direct Air’s business overall as well as its potential for growth in Worcester.
Two months later, however, Direct Air was grounded, reviled among area passengers left holding worthless tickets, under investigation by the U.S. Transportation Department for potential violations of federal charter regulations and on its way to being liquidated by the bankruptcy court.
“You get misled by people from time to time. It’s unfortunate,” Mr. Murray said, later adding, “Clearly, somebody must have known there was this financial house of cards when they sat down in this office.”
Mr. Warneck said in a brief telephone interview that he did not wish to discuss the representations he made to Massachusetts officials until the bankruptcy case runs its course, a process that could take years. What he did say indicates a rift now exists between him and the other founders and executives of Direct Air.
“I have not heard from any of my partners since we shut down,” Mr. Warneck said. “I stayed on and continued working on it where others did not.”
Fitchburg lawyer David M. Nickless, who represents Mr. Torbert personally in the Direct Air bankruptcy case, declined to comment. Lawyers for Direct Air have claimed in documents and hearings in U.S. Bankruptcy Court in Worcester that Mr. Torbert was misled about the company’s financial condition when he bought a controlling interest in September.
Mr. Mullan, the former state transportation secretary and Massport board member who is now a lawyer in private practice at Foley Hoag LLP in Boston, said the authority did the right thing in backing Direct Air, even though it didn’t work out in the end.
“I was supportive of the effort to have us make a good faith effort to have Direct Air work in Worcester, because our strategy had always been that we need a regional airport system and that Worcester was viable,” said Mr. Mullan, who grew up on Vernon Hill.
Massport emails show that in the weeks before Direct Air’s collapse, Worcester airport officials began to get flooded with complaints from passengers who were unable to reach anyone at the charter service. In response to one such complaint, Airport Director Andy Davis wrote to an aggrieved customer that “Direct Air’s service has been extremely successful out of Worcester and they continue to grow in the market.”
That was in late February, two weeks before Direct Air’s demise.
Over the three years that Direct Air operated charter flights to Florida and South Carolina from Worcester Regional Airport, the company got more than $1.1 million in public subsidies including waived fees and $550,000 to cover marketing expenses, according to internal Massport emails and other records obtained by the Telegram & Gazette.
For example, the records show that Massport, which owns the Worcester airport, cut two checks totaling $55,850 to pay for a Direct Air radio and television advertising campaign on July 13, 2011.
At that time, Direct Air was roughly $60,000 and counting in arrears on its landing fees and terminal rent and had not made any payments to Massport for months at a time.
Days before cutting the checks to CBS Radio and Comcast Spotlight on Direct Air’s behalf, Massport Interim Chief Executive Officer David S. Mackey had sent an email to then state Secretary of Transportation Jeffrey B. Mullan about the charter service’s seemingly shaky financial condition, warning that “there is no question it is operating on a ‘shoestring.’ ”
A few weeks later, in early August, Mr. Mackey sent out another Direct Air update email to Mr. Mullan and other officials summarizing a “contentious” conference call with Ed Warneck, one of Direct Air’s owners and its public face as marketing director.
Mr. Mackey noted that, “despite repeated requests, Direct Air has failed to make any payments to Massport,” and that the charter service, based in Myrtle Beach, S.C., also had not been paying the company that handled its ground operations in Worcester.
Mr. Warneck grew irritated during the conference call that Massport was pressing him to pay up, according to the summary.
“Warneck also indicated that he would be meeting with his partners next week to discuss the Worcester service, and that he intended to raise the matter directly with the lieutenant governor,” Mr. Mackey wrote in his summary of the call.
In separate interviews this past week, Mr. Mackey, former state transportation secretary Mullan and Lt. Gov. Timothy P. Murray said that, while they were aware of financial and customer service problems with the charter service, they were floored when Direct Air abruptly suspended all flights on the evening of March 12 and then filed for bankruptcy in Worcester a few days later.
They noted that the charter service’s low-cost flights to and from Worcester were often full or mostly full and that many large airlines have struggled financially at various times.
“We had no inkling of their impending implosion, and I’ll remember that day for a long time,” Mr. Mackey said.
He defended Massport’s decision to continue paying marketing expenses for Direct Air despite questions about its financial viability, saying that maintaining the only commercial air service at the struggling Worcester airport was a top priority for him and the authority’s board. Direct Air also received a $300,000 grant from the Federal Aviation Administration to support the Worcester service.
Massport offers a similar package of fee waivers and marketing funds to attract new international carriers to Logan International Airport in Boston and the practice is common in the industry, officials said.
Print advertisements in the Telegram & Gazette and online banners at telegram.com were among the Direct Air marketing expenses paid for by Massport at various times. The Telegram & Gazette also is an unsecured creditor in Direct Air’s bankruptcy.
“You have to prime the pump. You try to get something going,” Mr. Mackey said. “But I’d be the first person to say that we’re walking a fine line out there. We’ve got to be responsible to ourselves too. We’re not really in a position to just be giving money away for any airline.”
Asked if, in hindsight, he felt public money was wasted in an ultimately futile attempt to prop up a carrier that wasn’t viable, Mr. Mackey started to speak and then paused before answering.
“We did not anticipate, expect or plan that it was going to end the way it did,” he said. “We needed to nurture it along with Massport money, and there was an FAA grant too.”
Mr. Mackey said he’d do the same for another carrier in the future if necessary.
He and other Massport officials learned of Direct Air’s stunning collapse, which stranded thousands of passengers and derailed vacation plans at the height of the spring break travel season, from news reports the following morning.
State Secretary of Transportation Richard A. Davey, who had succeeded Mr. Mullan in September, emailed Mr. Mackey that afternoon asking for additional information. “When you have further update, let me know. LG is anxious,” Mr. Davey wrote, referring to Mr. Murray, the lieutenant governor.
Mr. Murray, a Worcester resident and former mayor of the city, had appeared at press events with Mr. Warneck touting Direct Air’s service from Worcester. They also had met privately several times to discuss the service, most recently in January, when Mr. Warneck brought the company’s new investor and majority owner, Hank L. Torbert, to the Statehouse to meet Mr. Murray.
Massport officials put together a briefing paper for Mr. Murray in advance of that meeting. The briefing states in part: “Direct Air has a history of late payment for services and lease agreements. At present, they are in arrears with Massport for rent and fees that have been charged since the waived period ended in February 2011.”
The briefing put the past due amount at $85,000, up $24,000 from the figure cited in emails from the previous summer.
Mr. Murray said in an interview that Mr. Warneck and Mr. Torbert presented an upbeat assessment in the January meeting of Direct Air’s business overall as well as its potential for growth in Worcester.
Two months later, however, Direct Air was grounded, reviled among area passengers left holding worthless tickets, under investigation by the U.S. Transportation Department for potential violations of federal charter regulations and on its way to being liquidated by the bankruptcy court.
“You get misled by people from time to time. It’s unfortunate,” Mr. Murray said, later adding, “Clearly, somebody must have known there was this financial house of cards when they sat down in this office.”
Mr. Warneck said in a brief telephone interview that he did not wish to discuss the representations he made to Massachusetts officials until the bankruptcy case runs its course, a process that could take years. What he did say indicates a rift now exists between him and the other founders and executives of Direct Air.
“I have not heard from any of my partners since we shut down,” Mr. Warneck said. “I stayed on and continued working on it where others did not.”
Fitchburg lawyer David M. Nickless, who represents Mr. Torbert personally in the Direct Air bankruptcy case, declined to comment. Lawyers for Direct Air have claimed in documents and hearings in U.S. Bankruptcy Court in Worcester that Mr. Torbert was misled about the company’s financial condition when he bought a controlling interest in September.
Mr. Mullan, the former state transportation secretary and Massport board member who is now a lawyer in private practice at Foley Hoag LLP in Boston, said the authority did the right thing in backing Direct Air, even though it didn’t work out in the end.
“I was supportive of the effort to have us make a good faith effort to have Direct Air work in Worcester, because our strategy had always been that we need a regional airport system and that Worcester was viable,” said Mr. Mullan, who grew up on Vernon Hill.
Massport emails show that in the weeks before Direct Air’s collapse, Worcester airport officials began to get flooded with complaints from passengers who were unable to reach anyone at the charter service. In response to one such complaint, Airport Director Andy Davis wrote to an aggrieved customer that “Direct Air’s service has been extremely successful out of Worcester and they continue to grow in the market.”
That was in late February, two weeks before Direct Air’s demise.
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