Paul Hammel
LINCOLN — State Auditor Mike Foley, in a forensic audit released Thursday, slammed a “riverboat gamble” Lincoln officials made with the now-defunct Red Way Airlines, saying it cost local taxpayers $700,000 and that ticket holders still haven’t been reimbursed for cancelled flights.
The Lincoln Airport Authority had contracted with Red Way to provide new destinations from the Lincoln Airport, pledging, with approval of the Lincoln City Council and Lancaster County Board, $3 million in pandemic-related, federal American Rescue Plan Act funds for the venture.
But the Colorado-based startup shut down in August after only three months of operation, after flights drew far fewer passengers than projected, despite offering one-way tickets for as little as $9.
Foley, in an 84-page report to the Airport Authority, said that Red Way “clearly violated” federal regulations by draining a $1.5 million escrow account intended to repay customers for tickets purchased on flights that were cancelled.
The audit also estimated that, despite earlier news reports, Red Way probably still owes jilted customers more than $100,000.
Overall, Foley said that the Lincoln Airport Authority provided more than $700,000 in local public funds under its control to assist Red Way, as well as waiving tens of thousands of dollars in fees that the airline would have been obligated to pay.
“In the final analysis, Red Way was a failed riverboat gamble bankrolled by taxpayers,” the auditor said in a press release.
“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 added. “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.”
In September, the Lincoln Airport Authority told the Lincoln Journal-Star that the Red Way deal was a risk, to expand service at the airport, that didn’t work out. Officials there set up an interview with the Examiner later Thursday.
Calls and an email to Red Way CEO Nick Wangler were not immediately returned on Thursday afternoon. Wangler formed Fly Next LLC, of which Red Way was its trade name, in February.
Initially, Red Way offered flights to Orlando, Florida; Las Vegas, Nevada; Atlanta, Georgia; Dallas/Fort Worth and Austin, Texas; Minneapolis/St. Paul, Minnesota; and Nashville, Tennessee.
Instead of owning its own aircraft, Red Way leased planes from an Florida company, Global Crossing. According to the audit, Red Way paid that firm $4.3 million by September 12.