Waste of the Day: Nebraska Spent $3.7 Million On Doomed Airline

Topline: Red Way Airlines opened for business in June 2023 and went bankrupt less than three months later. In that time, it managed to suck up $3.7 million in pandemic relief money from the federal government and the state of Nebraska, a new state audit found.

Key facts: Red Way was conceived as a new way to offer affordable charter flights from the Lincoln, Nebraska airport. It received a $3 million grant to cover the losses most airlines suffer during their first few months, with Lancaster County and the City of Lincoln each contributing $1.5 million of their stimulus funds from the American Rescue Plan Act of 2021.

The airline’s inaugural flight traveled from Lincoln to Orlando on June 8. It was the only Red Way flight to ever turn a profit.

Issues with high operating costs and low demand for flights out of Lincoln quickly arose. Some flights took off half-empty. Tickets were available for $9.

Red Way’s grant request predicted that it would sell $8.8 million in tickets in three months, but actual sales were less than one quarter of that. Meanwhile, Red Way continued flights to seven destinations — higher than normal for a brand-new airline — meaning grant funds were quickly drained.

To try and save Red Way, county officials sent another $700,000 in funding before the airline folded.

All parties involved appeared to be blissfully ignorant to the airline’s impending doom. Ten days before the company shut its doors, Lincoln Airport sent an email to a Lancaster County official stating that business “continued to do well.”

The airline has still not refunded an estimated $100,000 in ticket sales for canceled flights, even after the Nebraska Attorney General got involved.

Critical quote: State Auditor Mike Foley said officials missed obvious warning signs about Red Way’s business strategy.

“Had the Red Way business plan been prepared for the eyes of a reputable commercial bank lender, its proponents would not have gotten past the junior teller,” Foley said in a statement. “The cavalier treatment of government funds as monopoly money paved the way for the plan to be sold as a worthy risk to elected officials, who accepted it with few questions asked.”

Supporting quote: Lincoln Airport Authority’s Dave Haring said he did not regret taking a calculated risk on the airline.

“Certainly, we are all disappointed that it went through the proceeds as fast as it did. But I don’t know that I would apologize for taking a chance to try to get air service in the community,” Haring said.

Summary: Plenty of businesses have lied and committed fraud to secure pandemic relief funding. But Red Way’s only sin that led to wasting $3.7 million was genuine, earnest failure.

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com.

This article was originally published by RealClearInvestigations and made available via RealClearWire.