Alaska's North Slope Borough government has moved to seize the assets of RavnAir Group after it declared bankruptcy due to the coronavirus, aiming to protect its region's air service but also setting up a potential legal battle with the airline's lender.

Ravn, Alaska's largest regional carrier, filed for Chapter 11 bankruptcy and halted operations on Sunday after running out of cash due to the plunge in travel caused by the pandemic, threatening service to remote regions like the North Slope Borough that do not have outside road access.

In a seizure order on Sunday, North Slope Borough Mayor Harry Brower said his government, which serves a mostly Inupiat population, "must, in this time of disaster, ensure that its residents have food, medical supplies, and medical transport."

The area is roughly the size of Minnesota and has close to 10,000 residents.

Assistant Alaska attorney general Rob Schmidt told Reuters that while the order was motivated by legitimate concerns, it was illegal and counterproductive because it has put in doubt the $12 million in bankruptcy financing that Ravn's lender, BNP Paribas, had been prepared to give the company, with those assets as collateral.

Schmidt testified by teleconference at a U.S. Bankruptcy Court hearing in Delaware on Tuesday.

Ravn declined to comment on the borough's order.

Alaska's congressional delegation warned the U.S. government last week that many of the state's airlines, including Ravn, could collapse and leave many communities isolated, according to a letter seen by Reuters.

Ravn, which has a partnership with Seattle-based Alaska Airlines, is among U.S. airlines seeking federal aid to help them through an unprecedented decline in air travel.

Brower said in an e-mailed statement late on Monday that he would lift the asset seizure order as soon as other airlines get access to Ravn's facilities.

"We don't want profit or bankrupt Ravn's planes and calculators, we wanted the facilities under Borough control so they would not be boarded up and locked during the largest pandemic in modern history and could be used by other airlines," he said.

Alaska Airlines has said it will try to cover some of Ravn's routes, particularly to commercial fishing centers where the seafood industry is preparing for summer harvests. It also plans to increase cargo shipments around the state and attempt to hire some of Ravn's laid-off employees, the airline said on Monday.

Some smaller Alaska-based carriers have also agreed to fill in for Ravn by flying to and from remote villages.