Pentagon’s Biggest Air Transport Contractor Files for Bankruptcy [Updated]
While World and North American operate charters for a variety of customers, the US military’s withdrawal of troops from Iraq and drawdown of personnel in Afghanistan have likely put a heavy damper on Global’s revenues. World and North American’s largest single customer is the US Air Force Air Mobility Command, which transports troops and cargo to and from military bases around the world. Combined, World and North American are the largest providers of military transport services. The company has also been hurt by rising fuel costs and increased competition in the cargo market.
In the bankruptcy filing, Peachtree, Georgia-based Global listed $589.8 million in assets and $493.2 million in debt as of Dec. 31, according to a Bloomberg report.
Global said in a statement that operations would continue uninterrupted and employees would continue to be paid. Vendors with invoices issued prior to the filing will have to wait out the bankruptcy process, but future invoices will be paid as normal.
North American operates three Boeing 757 and five Boeing 767 aircraft, all in passenger configuration. World flies eight McDonnell Douglas MD-11 freighters, seven MD-11s in passenger configuration and four Boeing 747-400 freighters. All planes at both airlines are leased from a variety of sources.
Global Chairman and CEO Robert Binns said that while the company had made efforts to reduce expenses for the past year, “the Company needs to complete its comprehensive restructuring due to having too large a fleet, labor costs that exceed industry standards given the current global economic environment, and the necessity to align the capital structure with the size of the Company.”
“Throughout this restructuring process, our customers, including the United States Department of Defense, can continue to depend on us to provide the same safe, high quality service they know and have come to expect from us,” said continued Binns.
Global is represented by Kirkland & Ellis LLP and its financial advisor is Rothschild.
UPDATE 2/6 3:00 PM: In a bankruptcy court hearing Monday morning, Global said it seeks to shed more than half of its current fleet to save about $40 million a year. The company also wants to consolidate New York-based North American Airlines to its Peachtree, Georgia headquarters.