Global Aviation Holdings files for Chapter 11 protection

Global Aviation Holdings, the parent of ACMI and charter carriers World Airways and North American Airlines, “commenced a financial restructuring through the voluntary filing of petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code.” Global is owned by private investment firm Matlinpatterson.

World, which operates MD-11 and 747-400 freighters and MD-11 passenger aircraft, has struggled financially over the last several years, and the filing does not come as a surprise. As Global Aviation Holdings said in its announcement, its fleet is too large, its labor costs are too high, and its capital structure is out of alignment with the size of the company (which we take to mean that it is burdened by debt). Global also said that while it had “worked closely with its lessors, bondholders and other creditors and constituents over the past year, which led to the reduction of certain obligations,” it nonetheless felt restructuring through Chapter 11 was required.

In its petition, Global said it would continue normal flight operations, continue to pay wages and benefits. and pay vendors and suppliers for post-petition obligations. However, vendor and supplier invoices incurred prior to the filing “will be resolved through the Company’s Plan of Reorganization, which requires Court approval and has yet to be submitted.” Exactly what will be included in the reorganization plan is not yet known, but given the language of the announcement, it seems clear we can expect fleet reductions, wage reductions (and/or layoffs), and a request for debt relief.

Regarding the fleet, World operates nine MD-11Fs, four 747-400BDSFs, and seven MD-11s in passenger configuration. Of these, Cargo Facts believes the company owns three of the MD-11Fs, while the remaining seventeen aircraft are leased from a variety of lessors. We also point out that parent company MatlinPatterson has six A330-200Fs on firm order with Airbus. Given that fleet reduction will almost certainly be part of the restructuring, it is not clear what the fate of this order will be.

North American operates three 757-200s and five 767-300s, all in passenger configuration.