PODCAST: Western Global on verge of collapse

Andrew Crider
Hello and welcome to this episode of cargo facts connect the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I’m your host Andrew Crider, associate editor of Cargo Facts.

Jeff Lee
And I’m Jeff Lee, editor of cargo Facts.

Andrew Crider
Jeff, I think the biggest item of today has to be the Western global stories. I mean, we’ve been watching this company go through some pretty dramatic news over this past year. Could you tell me a little bit more?

Jeff Lee
Yeah, dramatic roller coaster, I mean, there are various words you can use to describe the situation. But they, it’s interesting, because they obviously, along with everyone else, during the pandemic had a very good time and they enjoyed, probably enjoyed some some serious revenue and earnings. And so they, of course, they’ve always been just operating mostly MD elevens, along with a few, seven, four sevens. And, you know, even before the pandemic, they actually acquired a production 747 that was previously with Atlas Air. But they, they also, I mean, we don’t know how, how exactly, or how large the connection is between, you know, their performance during the pandemic, and their order for two new triple seven freighters from Boeing. But that already was kind of, I guess, unexpected. But they said at the time, they said they were expanding and renewing their fleet with those. Then, you know, earlier this year, things started to go downhill a bit. And there were reports that they had canceled those two triple sevens. Now, I have to say that they as of right now, those two triple sevens still appear on the Boeing backlog. Not that that’s indicative of anything. But aside from that, this week, we had, you know, some rumors of them filing for bankruptcy as the market kind of changes. And it’s certainly very different from you know, 2020 2021. So, they, we also looked into the fleet in a bit more detail and they are only flying, you know, half of the total fleet. Now, that’s not

Andrew Crider
I wanted to jump right there on their fleet and direct the conversation to exactly the their fleet. Now, you meant you just mentioned that they still had the backlog into Boeing. Do these freighters haven’t begun being built there? They’re not currently under construction. Like what I’m thinking about, we saw for a number of cancellations for Russian operated aircraft where those aircraft were then resold to different operators. So something like that, where we don’t think that that might happen

Jeff Lee
in Russia, you mean the seven, four sevens on the trip? I mean, that they’re, there are, speaking of Russia, I mean,

Andrew Crider
just the Western Global aircraft there

Jeff Lee
Well, Volga Dnepr also interestingly still, I think, has an order for triple sevens still in the backlog, officially, but you know, we will have to wait to see what happens with those but if let’s

Andrew Crider
not physical aircraft, yet there are no there’s no right construction for the Western global aircraft.

Jeff Lee
Yeah, and we so this order from Western global came in early last year. And we we were not told of the exact timeline for these two aircraft. So they we don’t know whether they’ve begun production, but what we can say I guess if if they have been indeed been canceled then those Boeing would try and market those slots or the aircraft depending on whether whether they’ve been built but you know, Boeing will be trying to find a different home for them.

Andrew Crider
I imagine that’d be a big win for Boeing, given the how important delivery timelines have become for both Boeing and Airbus,

Jeff Lee
Right because suddenly you have two slots that aren’t at the back of the queue.

Andrew Crider
Now, let me let me ask you about the current Western global fleet. So it will me confirm that I’m correct. They operate as many as three 74 sevens. And as many as four, MD elevens, both of which are rather old with an average age of 29 and 28 years, respectively, and a couple more parked.

Jeff Lee
Yeah, they, they’ve had a preference, I guess, for secondhand or more aircraft. And they’ve always been, you know, very vocal about their preference for the MD 11. In particular. Now, on the MD 11, of course, there’s, you know, there are some interesting developments and with the other two operators of that type in the US, FedEx and UPS, now, basically committing to a retirement program for for their MD 11s.

Andrew Crider
So we don’t think that Western global MD elevens might end up in New hands, this might be the end of the rope for these aircraft.

Jeff Lee
I mean, we can’t say for sure, but some of the Western global MD elevens have not flown for years. And they some of those may have been acquired just for parts, or they they’re still in the process of heavy maintenance or something else we don’t exactly know. But given the retirement plans for this type, at both FedEx and UPS, it, it would seem unlikely that they would then go on to pick up more MD elevens while they’re retiring, you know, that same type from their fleet. But that doesn’t mean other operators and other regions might not be interested, you know, with, we have cargo three, for example, in Panama opting for some MD 10s that were previously with FedEx, so interesting. An interesting decision, but we will see.

Andrew Crider
Right, When was the last time we saw a freighter airline go belly up?

Jeff Lee
Um, I don’t

Andrew Crider
I jokingly say Atlas. But that’s not exactly what happened there. But it certainly

Jeff Lee
I can’t think of any in recent memory.

Andrew Crider
Would you think that this would be something with Western Global’s business model that made this company insolvent or a sign of the times?

Jeff Lee
It’s hard to say, I mean, it could be a bit of both. Of course, the market, as we know, is not quite as strong as it was in the past few years. But, I mean, even as I was saying, even during, you know, better times, the Western global fleet hasn’t been 100% in active service anyway. So it was kind of strange, you know, to still see some of their MD elevens, parked, you know, basically at the peak of the pandemic. Again, we don’t know whether that’s because some of those MD elevens were acquired just for parts, or what but it is interesting, and I think, also a couple of years ago, they they basically re structured so that or they offered an employee ownership scheme. And on that note, you know, that some of these employees are now basically suing the owners of the company. So there’s, there’s that legal dispute that the company also has to deal with now.

Andrew Crider
I want to now pivot to one of the other MD 11 operators and that would be ups. Now we know that the teamsters have demanded UPS submit its best and final offerings to the Union by June 30, today where we’re beginning to think that there’s the potential for a major strike. Now ups, of course, is one of the larger carriers and operating as far as the entirety of their network, not just air volume would be the second largest carrier of freight and cargo in the United States, which is a lead narrowly held over Amazon. Now, Amazon is now just beginning to take deliveries of a 330s. So perhaps the as far as the air freight component, we might see a shift soon. Do you think would you expect a major disruption for the air cargo industry? Should the UPS team go on strike? And what would that look like?

Jeff Lee
Um, I mean, first of all, we don’t know how many aircraft? How many? Yeah, how many of their freighters and how many flights will be affected? And which whether they’re going to limit this to certain routes? Certain airports, certain regions that we don’t know. But, I mean, what, what do you think?

Andrew Crider
I’m not sure. We will see the same effects with the airfreight component. Now, if it’s if teamsters this would be more downstream in their logistics chain. I, I’d imagine it would make some of their routes more expensive to operate. With less or not more expensive, just say it’d be hard to fill these Air aircraft with the lack of there’s teamsters downstream, and then the air freight component of their operation would become one something one of the more costly bargaining chips that both the union and the corporation would have, and it would become a liability quickly. It’s certainly something that I’ll be following with extreme interest and prejudice in the next coming weeks. But I want to move on lap. Lastly, we just published the trigger aircraft transactions in May and I wanted given an opportunity. Were there any transactions that were of special interest to you, Jeff?

Jeff Lee
I mean, I would say the we picked that photo, I guess for a reason. And that’s because that was one of the noteworthy transactions for the for the month,

Andrew Crider
To our listeners at home, Jeff is new to radio and podcasting. That photo is referring to an Alaskan 737.

Jeff Lee
I was about to describe the photo. Thank you. And that is an Alaska Airlines 737 800 in the hangar at Coopesa in Costa Rica, and that is the what will become their first 737 800 BCF is now undergoing conversion, and it will be completed and joined the airline as a Freighter later this year. That of course, is part of the sale conversion leaseback arrangement with bbam that they announced last year. So yeah, it’s noteworthy. There aren’t a whole lot of 737 800 freighter operators in the US and they will be the latest one. They’re also one of well in fact that the only scheduled combination carrier in the US not including of course, the ACMI and charter people like Atlas and ATSG and a few others. So yeah, they are the only main line scheduled passenger airline with freighters in the US. This will join their 3 737 700 BDSFs. It is interesting

Andrew Crider
You’re including Mesa airlines in that statement?

Jeff Lee
No, because they are also kind of a contract carrier so I wasn’t including them.

Andrew Crider
I see. Well, on that positive note, I’m going to say that that’s going to be all the time we have for today. For more multimedia coverage like this, search cargo facts connect on iTunes and Spotify and search cargo facts.com. Thank you very much for tuning in and join us again next time.